Public companies are required to disclose risks that can affect the business and impact the stock. These disclosures are known as “Risk Factors”. Companies disclose these risks in their yearly (Form 10-K), quarterly earnings (Form 10-Q), or “foreign private issuer” reports (Form 20-F). Risk factors show the challenges a company faces. Investors can consider the worst-case scenarios before making an investment. TipRanks’ Risk Analysis categorizes risks based on proprietary classification algorithms and machine learning.

Check-Cap disclosed 70 risk factors in its most recent earnings report. Check-Cap reported the most risks in the “Legal & Regulatory” category.

Risk Overview Q4, 2021

Risk Distribution

30% Legal & Regulatory

23% Finance & Corporate

19% Tech & Innovation

16% Production

7% Macro & Political

6% Ability to Sell

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.

Risk Change Over Time

2020

S&P500 Average

Sector Average

Risks removed

Risks added

Risks changed

Check-Cap Risk Factors

New Risk (0)

Risk Changed (0)

Risk Removed (0)

No changes from previous report

The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.

The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.

Risk Highlights Q4, 2021

Main Risk Category

Legal & Regulatory

With 21 Risks

Legal & Regulatory

With 21 Risks

Number of Disclosed Risks

-1

From last report

S&P 500 Average: 31

-1

From last report

S&P 500 Average: 31

Recent Changes

1Risks added

2Risks removed

8Risks changed

Since Dec 2021

1Risks added

2Risks removed

8Risks changed

Since Dec 2021

Number of Risk Changed

-20

From last report

S&P 500 Average: 3

-20

From last report

S&P 500 Average: 3

See the risk highlights of Check-Cap in the last period.

Risk Word Cloud

The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.

Risk Factors Full Breakdown - Total Risks 70

Legal & Regulatory

Total Risks: 21/70 (30%)Above Sector Average

Regulation11 | 15.7%

Regulation - Risk 1

If we are unable to obtain, or experience significant delays in obtaining, FDA clearances or approvals, or equivalent third country approvals for C-Scan or future products or product enhancements, our ability to commercially distribute and market our products could suffer.

Our products are subject to rigorous regulation by the FDA and numerous other federal, state and foreign governmental authorities and notified bodies. The process of obtaining regulatory clearances or approvals, or equivalent third-country approvals to market a medical device can be costly and time consuming, and we may not be able to obtain these clearances or approvals, or equivalent third-country approvals on a timely basis, if at all. In particular, we expect to eventually generate a portion of our revenues from sales of C-Scan and future products in the United States, the European Union, or third countries. Before a new medical device, or a new use of, or claim for, an existing product can be marketed in the United States, it must first receive clearance under Section 510(k) of the Federal Food, Drug, and Cosmetic Act, or FDA approval of a premarket approval application, or PMA, unless an exemption applies. The FDA will clear marketing of a low or moderate risk medical device through the 510(k) process if sufficiently similar predicate devices have previously been cleared via this pathway. In the 510(k) clearance process, the FDA must only determine that the proposed device is “substantially equivalent” to a device legally on the market, known as a “predicate” device, with respect to intended use/indications for use, technological characteristics and principles of operation in order to clear the proposed device for marketing. Clinical data is sometimes required to support substantial equivalence. High risk devices deemed to pose the greatest risk, such as life-sustaining, life-supporting, or implantable devices, or devices not deemed substantially equivalent to a previously cleared device, require approval of a PMA. The PMA process is more costly, lengthy and uncertain than the 510(k) clearance process. The PMA pathway requires an applicant to demonstrate the safety and effectiveness of the device based, in part, on the data obtained in clinical trials. A PMA application must be supported by extensive data, including, but not limited to, technical, preclinical, clinical trial, manufacturing and labeling data, to demonstrate to the FDA’s satisfaction the safety and efficacy of the device for its intended use. In instances where a device is novel and there is no suitable predicate device, but that device is deemed to be of low or moderate risk, the FDA can reclassify the device to class I or class II via de novo reclassification. This process involves the submission of a reclassification petition, and the FDA accepting that “special controls” are adequate to ensure the product’s performance and safety. The FDA now allows “direct” de novo reclassification petitions, a mechanism by which a sponsor can directly submit a detailed de novo reclassification petition as the device’s initial submission without having to first receive a not substantially equivalent, or NSE, decision on a 510(k) submission. These processes can be expensive and lengthy. FDA’s 510(k) clearance process may take 6 to 9 months, but it can last longer. Direct de novo reclassification typically takes at least 9 to 12 months from filing to clearance if no comments or disapproval from the FDA. The PMA pathway is much more costly and uncertain than the 510(k) clearance process or de novo reclassification, and generally takes at least 12 to 18 months, or even longer, from the time the application is filed with FDA to ultimate approval if no comments or disapproval from the FDA. We are not aware of any legally marketed predicate device upon which FDA could base a determination of substantial equivalence under a 510(k) clearance process. Our proposed strategy, therefore, is to submit a direct de novo reclassification petition for C-Scan. To support this petition, our objective is to demonstrate that the device poses a low or moderate risk to patients. We cannot assure you that FDA will not demand that we obtain PMA approval of C-Scan. FDA can delay, limit or deny clearance or approval of an application for many reasons, including, among others: • we may not be able to demonstrate to FDA’s satisfaction that our products are safe and effective for their intended use; • the data from our non-clinical studies and clinical trials may be insufficient to support clearance or approval; • in the case of a PMA submission, that the manufacturing process or facilities we use may not meet applicable requirements; and • changes in FDA’s 510(k) clearance, de novo reclassification, or PMA approval processes and policies, or the adoption of new regulations may require additional data. We may not obtain the necessary regulatory clearances, approvals or equivalent third country approvals to market C-Scan or future products in the United States or elsewhere. Any delay in, or failure to receive or maintain, clearance, approval for C-Scan or other products under development could prevent us from generating revenue from these products or achieving profitability.

Regulation - Risk 2

If we or our future distributors do not obtain and maintain the necessary regulatory clearances or approvals, or equivalent third country approvals in a specific country or region, we will not be able to market and sell C-Scan or future products in that country or region.

We intend to market C-Scan in a number of international markets. To be able to market and sell C-Scan in a specific country or region, we and/or our distributors must comply with the regulations of that country or region. While the regulations of some countries do not impose barriers to marketing and selling part or all of our products or only require notification, others require that we and/or our distributors obtain the approval of a specified regulatory authorities such as the Nuclear Regulatory Commission (NRC) in the U.S., the Swiss National Cooperative for the Disposal of Radioactive Waste (Nagra) and the German Federal Office for Radiation Protection (Bundesamt für Strahlenschutz, BfS), in addition to the CE mark that is required for medical devices throughout the EU. These regulations, and the time required for regulatory review, vary from country to country. Obtaining regulatory approvals is expensive and time-consuming, and we cannot be certain that we or our distributors will receive regulatory approvals required for C-Scan or any future products in each country or region in which we plan to market such products. As regards the CE-certification, we are engaged with Dekra Certification as our Notified Body. If we modify C-Scan or any future products, we or our distributors may need to apply for new regulatory approvals or our Notified Body may need to review the planned changes before we are permitted to sell the respective products. We may not meet the quality and safety standards required to maintain the authorizations that we or our distributors have received. If we or our distributors are unable to maintain our authorizations or CE Certificates in a particular country or region, we will no longer be able to sell C-Scan and/or any potential future products in that country or region, and our ability to generate revenues will be materially and adversely affected.

Regulation - Risk 3

C-Scan is a complex medical device that requires training for qualified personal and care for data analysis.

C-Scan is a complex medical device that requires training for qualified personal, including physicians, and care for data analysis. Although our distributors will be required to ensure that C-Scan is prescribed only by trained clinicians, the potential for misuse of C-Scan still exists due to its complexity. Such misuse could result in adverse medical consequences for patients that could damage our reputation, subject us to costly product liability litigation and otherwise have a material adverse effect on our business, financial condition and results of operations.

Regulation - Risk 4

If C-Scan or future products cause or contribute to a death or a serious injury, or malfunction in such a way that causes or contributes to a death or serious injury, we will be subject to medical device reporting regulations, which can result in corrective actions or enforcement actions from regulatory authorities.

Under FDA medical device reporting regulations, medical device manufacturers are required to report to the FDA information that a device has or may have caused or contributed to a death or serious injury or has malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction of our device (or any similar future product) were to recur. If we fail to investigate and report these events to FDA within the required timeframes, or at all, the FDA could take enforcement action against us. Any such adverse event involving our products also could result in future corrective actions, such as recalls or customer notifications, or agency action, such as inspection or enforcement action. Any corrective action, whether voluntary or involuntary, including any legal action taken against us, will require us to devote sufficient time and capital to the matter, distract management from operating our business, and may harm our reputation and financial results. Under the MDR we will now have to comply with the increased requirements of medical devices vigilance provisions under the MDR. In particular, according to Art. 83 MDR, we are required to have a post-market surveillance system in place in a manner that is proportionate to the risk class and appropriate for the type of device, as an integral part of the quality management system. Depending on the devices’ risk class, either a post market surveillance report or a periodic safety update report, or PSUR, must be created and provided to the competent authority upon request. The PSUR also has to be provided to the Notified Body. Furthermore, requirements on vigilance and incident reporting are increased and market surveillance competencies of the authorities are strengthened.

Regulation - Risk 5

If we fail to obtain or maintain necessary regulatory clearances or CE Certificates for C-Scan, or if there are regulatory changes in our existing or future target markets, our ability to sell C-Scan and generate revenues could be harmed.

C-Scan is a medical device that is subject to extensive regulations that are in particular intended to assure its safety, effectiveness and compliance with applicable consumer laws. These laws require medical devices to obtain approval or other market clearance before being placed on the market. If we fail to obtain or maintain these regulatory approvals or clearances, our ability to sell C-Scan and generate revenues will be materially harmed. These laws and regulations relate inter alia to the design, development, testing, manufacturing, storage, labeling, packaging, content and language of the instructions for use of the device, sale, promotion, distribution, importing and exporting, shipping, post-sale surveillance and recall from C-Scan’s markets, and all countries in which we intend to sell C-Scan apply some form of regulations of this kind. Most notably, we must comply with the EU law on medical devices, in particular, Regulation MDR and EU Member States’ laws implementing and complementing it, and other applicable EU and Member States’ law, and we are subject to extensive regulation in the United States by the FDA and other federal, state and local authorities. We are and will be subject to audits by our Notified Body under the MDR. During this audit, the third-party assessor or Notified Body will examine the maintenance and implementation of our quality control system, device post-marketing vigilance system and any changes or modifications made to our products. On May 26, 2021, the MDR became formally applicable and replaced the former regulatory framework for medical devices in the EU under the medical devices directives. The MDR strengthens the medical devices rules in the EU. In particular, the MDR results in several medical devices being classified in higher risk classes and therefore face elevated regulatory requirements. In addition, the MDR generally elevates regulatory requirements to medical devices. As a result, it has become more difficult to market medical devices and costs incurred for clinical evaluation, conformity assessment and post marketing surveillance have increased and will increase further; such regulatory changes may adversely affect our business, financial condition and results of operations or restrict our operations.

Regulation - Risk 6

Even if C-Scan or future products are cleared or approved by regulatory authorities or after obtaining CE Certificates from our Notified Body, modifications to C-Scan or future products may require new regulatory clearances or approvals, new CE Certificates, or may require us to recall or cease marketing it until the necessary clearances, approvals or CE Certificates are obtained.

Once cleared, approved or marketed, modifications to C-Scan or future products may require new regulatory approvals, clearances, including CE Certificates from our Notified Body, 510(k) clearances or premarket approvals, or require us to recall or cease marketing the modified devices until these clearances or approvals are obtained. Any modification to a 510(k)-cleared device that could significantly affect its safety or efficacy, or that would constitute a major change in its intended use, requires a new 510(k) clearance or, possibly, a new de novo classification petition or PMA. The FDA requires device manufacturers to initially make and document a determination of whether or not a modification requires a new approval, supplement or clearance. A manufacturer may determine that a modification could not significantly affect safety or efficacy and does not represent a major change in its intended use, so that no new 510(k) clearance is necessary. However, the FDA can review a manufacturer’s decision and may disagree. The FDA may also on its own initiative determine that a new clearance or approval is required. Subject to compliance with FDA guidance we may make modifications to C-Scan in the future that we believe do not or will not require additional clearances or approvals. Further, our products could be subject to recall if the FDA determines, for any reason, that our products are not safe or effective. Any recall or FDA requirement that we seek additional approvals or clearances could result in significant delays, fines, increased costs associated with modification of a product, loss of revenue and potential operating restrictions imposed by the FDA. If a manufacturer determines that a modification to an FDA-cleared device could significantly affect its safety or efficacy, or would constitute a major change in its intended use, then the manufacturer must file for a new 510(k) clearance or possibly a new de novo classification petition or premarket approval application. Where we determine that modifications to our products require a new clearance or approval, we may not be able to obtain those additional clearances or approvals for the modifications or additional indications in a timely manner, or at all. Any modification to a PMA-approved device must either be approved in a PMA Supplement, or if the modification does not impact the device’s safety or effectiveness, described in a 30-Day Notice or in the device’s Annual Report. The FDA may not approve a modification described in a PMA Supplement, in which case the modified device cannot be marketed. The FDA can also disagree that a change described in a 30-Day Notice or Annual Report is appropriately described in either filing, and request that the company file a PMA Supplement and/or request that the company cease marketing the modified device until the PMA Supplement is approved. Similar rules also apply in foreign jurisdictions. In the EU, we must inform the Notified Body that was involved in the conformity assessment of the medical devices we market or sell in the EU of any planned substantial changes to our quality system with regard to C-Scan or other devices we may place on the market, if such changes could affect compliance with the essential requirements laid down in the Annexes to the MDR (Essential Requirements), respectively, or changes to the devices’ intended purpose. The Notified Body will then assess the changes and verify the products’ conformity with the Essential Requirements. If the assessment is favorable, the Notified Body will issue a new CE Certificate or an addendum to the existing CE Certificate attesting compliance with the Essential Requirements. If the Notified Body or a relevant regulatory authority disagrees with our assessments and repeals an authorization or an existing CE Certificate, we may be required to apply for a new CE Certificate or other new regulatory clearances or approvals for modifications, and until such new CE-Certificate or other regulatory clearance or change approval is obtained, we may be required to recall and/or to stop marketing the modified devices. Obtaining clearances and approvals, or new or amended CE Certificates for device modifications can be a time-consuming process, and delays in obtaining required future clearances, approvals, or CE Certificates could adversely affect our ability to introduce new or enhanced products in a timely manner, which in turn could harm our future growth.

Regulation - Risk 7

Even if C-Scan and future products are cleared or approved by regulatory authorities or after obtaining CE Certificates from our Notified Body, if we or our suppliers fail to comply with ongoing FDA or other foreign regulatory authority requirements, or if we experience unanticipated problems with our products, our products could be subject to restrictions or withdrawal from the market.

The manufacturing processes, reporting requirements, post-approval clinical data and promotional activities associated with any product for which we obtain clearance, approval or CE Certificates, or equivalent third country approval will be subject to continuous regulatory review, oversight and periodic inspections by the FDA other domestic and foreign regulatory authorities and our Notified Body. In particular, we and certain of our suppliers are required to comply with the FDA’s Quality System Regulations, or QSR, as well as current good manufacturing practices, or cGMP. In the EU, we will also be subject to the quality management system requirements laid down in the Annexes to the MDR. Such compliance can be facilitated by, a certificate of compliance with the current version of the ISO 13485 (which, at this point, is ISO 13485:2016). Through compliance with the ISO 13485:2016 standard, we will benefit from a presumption of conformity with the relevant quality management system requirements laid down in the Annexes to the MDR. These regulations and standards govern inter alia the methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging, storage and shipping of any product for which we obtain clearance or approval, CE Certificates, or equivalent third country approval. Regulatory authorities, such as the FDA, and our Notified Body enforce the QSR and other regulations through periodic inspections. The failure by us or one of our suppliers to comply with applicable statutes and regulations falling within the competence of the FDA and other regulatory authorities or our Notified Body, or the failure to timely and adequately respond to any adverse inspectional observations or product safety issues, could result in, among other things, any of the following enforcement actions: • untitled letters, warning letters, fines, injunctions, corporate integrity agreements, consent decrees and civil penalties; • unanticipated expenditures to address or defend such actions; • customer notifications for repair, replacement or refunds; • recall, detention or seizure of our products; • operating restrictions or partial suspension or total shutdown of production; • refusing or delaying our requests for 510(k) clearance, de novo classification or premarket approval of new products or modified products; • operating restrictions; • withdrawing 510(k) clearances, de novo classification, or PMA approvals that have already been granted; • suspension or withdrawal of our CE Certificates; • refusal to grant export approval for our products; or • criminal prosecution. If any of these actions were to occur, our reputation would be harmed, our product sales and profitability would suffer and we may not be able to generate revenue. Furthermore, our key suppliers may not currently be or may not continue to be in compliance with all applicable regulatory requirements which could result in our failure to produce our products on a timely basis and in the required quantities, if at all. Even if regulatory clearance or approval of a product is granted, or after obtaining CE Certificates, such clearance or approval, or CE Certificates may be subject to limitations on the intended uses for which the product may be marketed and reduce our potential to successfully commercialize the product and generate revenue from the product. If FDA or the competent regulatory authorities of foreign countries determines that our promotional materials, labeling, training or other marketing or educational activities constitute the promotion of an unapproved use or the promotion of an intended purpose not covered by our CE mark, they could request that we cease or modify our training or promotional materials or subject us to regulatory enforcement actions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our training or other promotional materials to constitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement. In addition, we may be required to conduct costly post-market testing and surveillance to monitor the safety or effectiveness of our products, and we must comply with medical device reporting requirements, including the reporting of adverse events and malfunctions related to our products. Later discovery of previously unknown problems with our products, including unanticipated adverse side effects or adverse side effects of unanticipated severity or frequency, manufacturing problems, or failure to comply with regulatory requirements such as QSR, may result in changes to labeling, restrictions on such products or manufacturing processes, withdrawal of the products from the market, voluntary or mandatory recalls, a requirement to repair, replace or refund the cost of any medical device we manufacture or distribute, fines, suspension or withdrawal of regulatory approvals or CE Certificates, product seizures, injunctions or the imposition of civil or criminal penalties, all of which would adversely affect our business, financial condition and operating results and prospects.

Regulation - Risk 8

Changed

We are a foreign private issuer and, as a result, we are not subject to U.S. proxy rules and are subject to the Securities Exchange Act of 1934 reporting obligations that, to some extent, are more lenient and less frequent than those applicable to a U.S. issuer.

We report under the Securities Exchange Act of 1934, as amended, or the Exchange Act as a foreign private issuer. Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. public companies, including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; (ii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events. We intend to furnish quarterly reports to the SEC on Form 6-K for so long as we are subject to the reporting requirements of Section 13(g) or 15(d) of the Exchange Act, although the information we furnish may not be the same as the information that is required in quarterly reports on Form 10-Q for U.S. domestic issuers. In addition, while U.S. domestic issuers that are not large accelerated filers or accelerated filers are required to file their annual reports on Form 10-K within 90 days after the end of each fiscal year, foreign private issuers are not required to file their annual report on Form 20-F until 120 days after the end of each fiscal year. Foreign private issuers are also exempt from the Regulation FD (Fair Disclosure), aimed at preventing issuers from making selective disclosures of material information. Although we intend to make interim reports available to our shareholders in a timely manner, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers.

Regulation - Risk 9

Changed

There is no guarantee that the FDA will grant de novo reclassification or PMA approval of C-Scan and failure to obtain necessary clearances or approvals for our future products would adversely affect our ability to grow our business.

C-Scan and some of our future products will require FDA clearance of a 510(k), de novo reclassification, or may require FDA approval of a PMA. The FDA may not approve or clear C- Scan or our future products for the indications that are necessary or desirable for successful commercialization. Indeed, the FDA may refuse our requests for 510(k) clearance, de novo reclassification or PMA approval for C-Scan or any other future product, new intended uses or modifications to these products once they are cleared or approved for marketing. Our strategy is to submit a direct de novo reclassification petition for C-Scan following completion of a U.S. pivotal study. A de novo reclassification generally applies where there is no predicate device and the FDA believes the device poses a low to moderate risk. De novo reclassifications can either be submitted in lieu of a 510(k) notice, such as in our case, or after a 510(k) notice has been filed and found NSE (Not Substantial Equivalent). If a 510(k) notice is found NSE, a de novo petition must be submitted within 30 days from the receipt of the NSE determination. To support our direct de novo reclassification petition, our objective is to demonstrate that the device poses a low to moderate risk to patients. If the FDA determines that C-Scan is not a candidate for de novo reclassification, it will require approval of the device for market through the PMA process. A PMA application must be supported by extensive data, including, but not limited to, technical, preclinical, clinical trial, manufacturing and labeling data, to demonstrate to the FDA’s satisfaction the safety and efficacy of the device for its intended use. By statute, the FDA has 180 days to review the “accepted application,” although, generally, review of the application can take between one and three years. During this review period, the FDA may request additional information or clarification of information already provided or even request new data that may require us to conduct additional tests. Also during the review period, an advisory panel of experts from outside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. In addition, the FDA will conduct a preapproval inspection of the manufacturing facility to ensure compliance with quality system regulations. The FDA’s review of a PMA could significantly delay our plans to get to market. There is also no guarantee that the FDA would approve a PMA. Failure to receive clearance or approval for C-Scan or future products would have an adverse effect on our ability to expand our business. Even if the FDA ultimately accepts our de novo reclassification petition, to support our petition, we still may be required to conduct additional clinical trials before a petition can be filed. Such studies or trials can be costly and the results uncertain. If we are unable to successfully complete required clinical studies or trials, we will not receive FDA clearance or approval.

Regulation - Risk 10

Changed

Although we received FDA approval of our investigational device exemption, or IDE (including our IDE amended application) for our U.S. pivotal study, the outcome of the study is inherently uncertain, even if the study is commenced and completed .

We received FDA approval of our IDE and our IDE amended application for our planned U.S. pivotal study. The commencement of any other clinical trials that we may initiate, subject to sufficient available funds, is subject to acceptance by the FDA of an IDE and acceptance by other regulatory authorities of the foreign equivalent of an IDE, and finalizing the planned trial design based on discussions with the FDA and other applicable regulatory authorities. In the event that the FDA or any other regulatory authority requires us to complete additional preclinical studies or we are required to satisfy other FDA or other regulatory requests, the start of the U.S. pivotal study may be delayed. Even after we receive and incorporate guidance from these regulatory authorities, the FDA or other regulatory authorities could disagree that we have satisfied their requirements to commence our clinical trial or change their position on the acceptability of our planned trial design or the clinical endpoints selected, which may require us to complete additional preclinical studies or clinical trials or impose stricter approval conditions than we currently expect. As a result of the foregoing, the research and development, preclinical studies and clinical testing is expensive and can take years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the development process. (see “Risk Factors – Risks Related to Our Business – Clinical failure can occur at any stage of clinical development. Our clinical experience to date does not necessarily predict future results and may not have revealed certain potential limitations of the technology and potential complications from C-Scan and may require further clinical validation. Any product version we advance through clinical trials may not have favorable results in later clinical trials or receive regulatory approval.”).

Regulation - Risk 11

If we fail to comply with the U.S. federal Anti-Kickback Statute and similar state and third-country laws, we could be subject to criminal and civil penalties and exclusion from federally funded healthcare programs including the Medicare and Medicaid programs and equivalent third-country programs, which would have a material adverse effect on our business and results of operations.

A provision of the Social Security Act, commonly referred to as the federal Anti-Kickback Statute, prohibits the knowing and willful offer, payment, solicitation or receipt of any form of remuneration, directly or indirectly, in cash or in kind, to induce or reward the referring, ordering, leasing, purchasing or arranging for, or recommending the ordering, purchasing or leasing of, items or services payable, in whole or in part, by Medicare, Medicaid or any other federal healthcare program. PPACA, among other things, clarified that a person or entity needs not to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it. Although there are a number of statutory exemptions and regulatory safe harbors to the federal Anti- Kickback Statute protecting certain common business arrangements and activities from prosecution or regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that do not fit squarely within an exemption or safe harbor may be subject to scrutiny. The federal Anti-Kickback Statute is very broad in scope and many of its provisions have not been uniformly or definitively interpreted by existing case law or regulations. In addition, most of the states have adopted laws similar to the federal Anti-Kickback Statute, and some of these laws are even broader than the federal Anti-Kickback Statute in that their prohibitions may apply to items or services reimbursed under Medicaid and other state programs or, in several states, apply regardless of the source of payment. Violations of the federal Anti-Kickback Statute may result in substantial criminal, civil or administrative penalties, damages, fines and exclusion from participation in federal healthcare programs. All of our financial relationships with healthcare providers, purchasers, formulary managers, and others who provide products or services to federal healthcare program beneficiaries are potentially governed by the federal Anti-Kickback Statute and similar state laws. We believe our operations are in compliance with the federal Anti-Kickback Statute and similar state laws. However, we cannot be certain that we will not be subject to investigations or litigation alleging violations of these laws, which could be time-consuming and costly to us and could divert management’s attention from operating our business, which in turn could have a material adverse effect on our business. In addition, if our arrangements were found to violate the federal Anti- Kickback Statute or similar state laws, the consequences of such violations would likely have a material adverse effect on our business, results of operations and financial condition. There are other federal and state laws that may affect our ability to operate, including the federal civil False Claims Act, which prohibits, among other things, individuals or entities from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment of government funds or knowingly making, using or causing to be made or used, a false record or statement material to an obligation to pay money to the government or knowingly concealing or knowingly and improperly avoiding, decreasing, or concealing an obligation to pay money to the federal government. PPACA amended the Social Security Act to provide that the government may assert that a claim including items or services resulting from a violation of the federal Anti- Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act. Moreover, we may be subject to other federal false claim laws, including, among others, federal criminal healthcare fraud and false statement statutes that extend to non-government healthcare benefit programs. Moreover, there are analogous state laws. Violations of these laws can result in substantial criminal, civil or administrative penalties, damages, fines and exclusion from participation in federal healthcare programs. Similar restrictions are imposed by the national legislation of many third countries in which our medical devices will be marketed. Moreover, the provisions of the Foreign Corrupt Practices Act of 1997 and other similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from providing money or anything of value to officials of foreign governments, foreign political parties, or international organizations with the intent to obtain or retain business or seek a business advantage. Recently, there has been a substantial increase in anti-bribery law enforcement activity by U.S. regulators, with more aggressive and frequent investigations and enforcement by both the U.S. Securities and Exchange Commission and the Department of Justice. A determination that our operations or activities violated United States or foreign laws or regulations could result in imposition of substantial fines, interruption of business, loss of supplier, vendor or other third-party relationships, termination of necessary licenses and permits, and other legal or equitable sanctions. In addition, lawsuits brought by private litigants may also follow as a consequence.

Litigation & Legal Liabilities2 | 2.9%

Litigation & Legal Liabilities - Risk 1

It may be difficult to enforce a judgment of a U.S. court against us, certain of our officers and directors or the Israeli experts named in this Annual Report in Israel or the United States, to assert U.S. securities laws claims in Israel or to serve process on certain of our officers and directors and these experts.

We are incorporated in Israel. All of our executive officers, one of our directors and our Israeli experts, reside in Israel, and substantially all of our assets and a substantial portion of the assets of these persons are located in Israel. Therefore, a judgment obtained against us, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United States and may not be enforced by an Israeli court. It also may be difficult for you to effect service of process on these persons in the United States or to assert U.S. securities law claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws on the grounds that Israel is not the most appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proven as a fact by expert witnesses, which can be a time consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the matters described above. As a result of the difficulty associated with enforcing a judgment against us in Israel, you may not be able to collect any damages awarded by either a U.S. or foreign court.

Litigation & Legal Liabilities - Risk 2

The use of any of our C-Scan Cap, C-Scan Track or C-Scan View could result in product liability or similar claims that could be expensive, damage our reputation and harm our business.

Our business exposes us to an inherent risk of potential product liability or similar claims related to the manufacturing, marketing and sale of medical devices. The medical device industry has historically been litigious, and we face financial exposure to product liability or similar claims if the use of any of our C-Scan Cap, C-Scan Track or C-Scan View were to cause or contribute to injury or death, including, without limitation, harm to the body caused by the procedure or inaccurate diagnoses from the procedure that could affect treatment options. There is also the possibility that defects in the design or manufacture of any of these products might necessitate a product recall. Although we plan to maintain product liability insurance, the coverage limits of these policies may not be adequate to cover future claims. In the future, we may be unable to maintain product liability insurance on acceptable terms or at reasonable costs and such insurance may not provide us with adequate coverage against potential liabilities. A product liability claim, regardless of merit or ultimate outcome, or any product recall could result in substantial costs to us, damage to our reputation, customer dissatisfaction and frustration, and a substantial diversion of management attention. A successful claim brought against us in excess of, or outside of, our insurance coverage could have a material adverse effect on our business, financial condition and results of operations.

Taxation & Government Incentives4 | 5.7%

Taxation & Government Incentives - Risk 1

There is a risk that we could be treated as a domestic (U.S.) corporation for U.S. federal income tax purposes by reason of the transactions related to our acquisition of all of the business operations and substantially all of the assets of Check-Cap LLC on May 31, 2009, or the Reorganization.

Section 7874(b) of the Internal Revenue Code of 1986, as amended, or the Code, generally provides that a foreign corporation (i.e., a corporation created or organized under the laws of a jurisdiction outside of the United States) would be treated as a domestic (U.S.) corporation for U.S. federal income tax purposes if, pursuant to a plan or a series of related transactions, (1) the foreign corporation acquires, directly or indirectly, substantially all of the assets of a domestic corporation (or substantially all of the properties constituting a trade or business of a domestic partnership), (2) after the acquisition, the former shareholders of the acquired corporation by reason of holding shares of the acquired corporation (or, in the case of an acquisition with respect to a domestic partnership, the former partners of the domestic partnership by reason of holding a capital or profits interest in the domestic partnership) own at least 80% of the stock (by vote or value) of the acquiring corporation, and (3) after the acquisition, the expanded affiliated group that includes the acquiring corporation does not have substantial business activities in the foreign country in which, or under the laws of which, the acquiring corporation is created or organized when compared to the total business activities of such expanded affiliated group. On the basis of analysis of the relevant facts and circumstances and the relevant law (including the temporary regulations under Section 7874 applicable at the time of the Reorganization), it was determined that the third condition described in the preceding sentence was not met with respect to the Reorganization and, therefore, that the inversion tax rules of Section 7874(b) would not apply to treat us as a domestic corporation for U.S. federal income tax purposes. However, since this determination was made on the basis of all of the relevant facts and circumstances, and it is not clear which facts and circumstances the Internal Revenue Service, or the IRS, may consider more important than others, this conclusion is not free from doubt. If Section 7874(b) were to apply to the Reorganization (and we were to be treated as a domestic corporation for U.S. federal income tax purposes), then, among other things, (i) we would be subject to U.S. federal income tax on our worldwide taxable income (if and when we have taxable income); (ii) certain payments (e.g., interest and dividends) that we make (or have made) to our foreign investors may be (or may have been) subject to U.S. withholding taxes; (iii) we may be subject to significant penalties for the failure to file certain tax returns and reports, including reports with respect to our foreign bank accounts; and (iv) the U.S. unitholders of Check-Cap LLC would not have been subject to U.S. federal income tax on royalties that are deemed to be paid to them under Section 367(d) of the Code as a result of the Reorganization. As discussed under Item 5B “Operating and Financial Review and Prospects – Liquidity and Capital Resources – Application of Critical Accounting Policies and Estimates – Royalties provision – Reimbursement liability to Check-Cap LLC unitholders,” as part of the Reorganization, we committed to reimburse the unitholders of Check-Cap LLC for any tax burdens that may be imposed on them due to the Reorganization, including royalties that are deemed to be paid to the U.S. unitholders under Section 367(d) of the Code. Prospective investors are urged to consult their own advisors on these issues. The balance of this discussion, including the discussion under Item 10E “Additional Information – Taxation – U.S. Federal Income Taxation,” assumes that we will be and have been treated as a foreign corporation for U.S. federal income tax purposes.

Taxation & Government Incentives - Risk 2

We may be eligible for tax benefits from government programs, which require us to meet certain conditions, including regarding the location of our property, plant and equipment and manufacturing in Israel. We can provide no assurance that we would continue to be eligible for such benefits and/or that any such benefits will not be terminated in the future.

Our manufacturing facilities in Israel may qualify as a “Benefited Enterprise” under the Israeli Law for Encouragement of Capital Investments, 5719-1959, which would entitle us to receive certain tax benefits. In order to be eligible for such benefits, we would be required to meet certain conditions, including the making of a minimum capital investment in our productive assets and the carrying on of a required portion of our manufacturing in Israel. The amount of the benefit will be determined in accordance with various conditions, including the location of our property, plant and equipment and the location of certain of our sub-contractors. If we cease to meet the required conditions for eligibility, the tax benefits could be cancelled and we could be required to pay increased taxes or to refund the amounts of the benefits received with interest and penalties. We can provide no assurance as to the amount of future capital investment in our productive assets, our future manufacturing location and the future location of our property, plant and equipment and certain of our sub-contractors, and therefore, we cannot provide assurance that we will be eligible for such tax benefits or assurance as to the amount of such tax benefits. Even if we continue to meet the relevant requirements, the tax benefits that Benefited Enterprises receive may not be continued in the future at their current levels or at all. If these tax benefits were reduced or eliminated, the amount of taxes that we would be required to pay would likely increase, as all of our operations would consequently be subject to corporate tax at the standard rate, which could adversely affect our results of operations. See Item 10E “Additional Information—Taxation—Israeli Tax Considerations and Government Programs—Law for the Encouragement of Capital Investments, 5719-1959” for additional information concerning these tax benefits.

Taxation & Government Incentives - Risk 3

There is a risk that we may be classified as a passive foreign investment company, or PFIC, which could result in adverse U.S. federal income tax consequences to U.S. investors.

In general, we will be treated as a passive foreign investment company, or a PFIC, for any taxable year in which either (1) at least 75% of our gross income (including our pro rata share of the gross income of our 25% or more- owned corporate subsidiaries) is passive income or (2) at least 50% of the average value of our assets (including our pro rata share of the assets of our 25% or more-owned corporate subsidiaries) is attributable to assets that produce, or are held for the production of, passive income. Passive income generally includes dividends, interest, rents, royalties, and gains from the disposition of passive assets. If we are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. Holder (as defined in Item 10E “Additional Information—Taxation—U.S. Federal Income Taxation—General”) of our securities, the U.S. Holder may be subject to increased U.S. federal income tax liability upon a sale or other disposition of our securities or the receipt of certain excess distributions from us and may be subject to additional reporting requirements. We believe that we were a PFIC for the taxable year ended December 31, 2021 and may be a PFIC for the taxable year ending December 31, 2022. Our actual PFIC status for our current taxable year or any subsequent taxable year is uncertain and will not be determinable until after the end of such taxable year. Accordingly, there can be no assurance with respect to our status as a PFIC for our taxable year ending December 31, 2022 or any subsequent taxable year. U.S. investors are urged to consult their own tax advisors regarding the possible application of the PFIC rules. For more information, see Item 10E “Additional Information—Taxation—U.S. Federal Income Taxation—U.S. Holders—Passive Foreign Investment Company Rules.”

Taxation & Government Incentives - Risk 4

Changed

Pursuant to the terms of the Israeli government grants we received for research and development expenditures, we are obligated to pay certain royalties on our revenues to the Israeli government. In addition, the terms of Israeli government grants we received require us to satisfy specified conditions and to make additional payments in addition to repayment of the grants upon certain events.

We have received grants from the Government of the State of Israel through the IIA (formerly the OCS) for the financing of a portion of our research and development expenditures and recently, in January 2021, to finance a portion of the development of our manufacturing line, pursuant to the Innovation Law and related regulations and guidelines. As of December 31, 2021, we had received funding from the IIA for research and development of C-Scan in the aggregate amount of approximately $5.6 million. As of December 31, 2021, we had not paid any royalties to the IIA and had a contingent obligation to the IIA with respect to such funding (including interest at the rate of 12-month LIBOR) in the amount of approximately $6.1 million. In addition, in January 2021, we received an IIA grant approval to support the funding of our transition from research and development to manufacturing in the amount of up to $786,000 (along with a co-investment by us of the same amount), which we are not required to repay to the IIA , subject to the terms and conditions set forth in the grant approval, of which we received approximately $349,000 in 2021 and $82,000 in January 2022. We may apply for additional IIA grants in the future; however, there is no assurance that such applications will be approved in the amount requested or at all. Furthermore, the funds available for IIA grants out of the annual budget of the State of Israel have been reduced in the past and may be further reduced in the future. We cannot predict whether we will be entitled to any future grants, or the amounts of any such grants. Under the terms of the Innovation Law as currently in effect, products developed with IIA funding are required to be manufactured in Israel, unless the IIA approved grant program includes a pre-determined portion of manufacturing that may be performed outside Israel (as certain of our IIA approved grants included). The approval of the IIA is required for the transferring of manufacturing outside Israel in excess of such pre-determined portion (however, only a notice to the IIA, as opposed to approval, is required for the transfer outside Israel of up to 10% of the cumulative manufacturing in excess of such pre-approved portion). If manufacturing of IIA-funded products is transferred outside Israel (following IIA approval) in excess of the pre-determined percentage included in the grant approval, then the royalty repayment rate will be increased by 1% with respect to the additional approved percentage to be manufactured outside Israel and the royalty repayment for the entire approved program may be increased to up to three times the amount of the grants received, depending on the percentage manufactured outside Israel (plus accrued interest). For example, during 2019, in connection with the application to the IIA for certain research and development funding, we provided notice to the IIA with respect to the transfer of manufacturing outside of Israel of our C-Scan Track in an amount that represents less than 10% of cumulative deviation exceeding the pre-determined portion to be manufactured abroad that was included in our grant approval. This may increase our royalty repayment ceiling to 120% of the revenues of the C-Scan Track and the repayment rate may increase by 1% for the part of manufacturing carried out abroad. We are continuing to explore whether certain other components of C-Scan can be assembled outside of Israel. For example, we are continuing to explore whether it would be possible to assemble the capsule without the X-ray source in Israel, and have the X-ray source subsequently manufactured and assembled into C-Scan at a certified radioisotope production facility or at a distribution center outside Israel. Over the years, we received approval of grant applications that included a certain predetermined percentage of manufacturing to be performed outside of Israel of the X-ray source but additional examination of these approvals and consequent manufacturing is required to determine liabilities to the IIA, if any. IIA prior approval is also required for the transfer of IIA-funded know-how to a third party outside of Israel (including by way of license), which we may not receive (and any such approval would typically be subject to payment of a redemption fee, calculated according to a formula under the Innovation Law, which may be in the amount of up to six times the amount of the grants received (less paid royalties, if any, and depreciation, but no less than the total grants received), plus accrued interest. Even following the full repayment of any IIA grants, we must nevertheless continue to comply with the requirements of the Innovation Law and related regulations and guidelines. The foregoing restrictions and requirements for payment may impair our ability to sell our technology assets outside of Israel or to outsource or transfer development or manufacturing activities with respect to any product or technology outside of Israel. Furthermore, the consideration available to our shareholders in a transaction involving the transfer outside of Israel of technology or know-how developed with IIA funding (such as a merger or similar transaction) may be reduced by any amounts that we are required to pay to the IIA. If we fail to comply with any of the conditions and restrictions imposed by the Innovation Law and related regulations and guidelines, or by the specific terms under which we received the grants, we may be required to refund any grants previously received together with interest and penalties, and, in certain circumstances, may be subject to criminal charges.

Environmental / Social4 | 5.7%

Environmental / Social - Risk 1

Changed

Our business is subject to complex environmental and health legislation in various jurisdictions that may increase our costs and our risk of noncompliance.

Our research and development and manufacturing processes, including through our service providers, involve the handling of potentially harmful radioactive and other hazardous materials. Therefore, we and our service providers may be subject to various environmental, health and safety laws and regulations , including governing the use, shipping, handling, storage and disposal of these materials, and we incur expenses related to compliance with these laws and regulations. If we are found to have violated applicable environmental, health and safety laws, whether as a result of human error, equipment failure or other causes, we could be held liable for damages, penalties and costs of remedial actions and could be subject to work stoppages or delays, which could materially adversely affect our business, financial condition and results of operations. The risk of contamination or injury from these materials cannot be eliminated. If an accident or release of any radioactive or other hazardous material occurs, we could be held liable for resulting damages, including for investigation, remediation and monitoring of the contamination, including the costs of which could be substantial. In addition, we may be required to pay damages or civil judgments in respect of third-party claims, including those relating to personal injury (including exposure to radioactive materials) or contribution claims. In the future, we could be subject to additional environmental requirements or existing environmental laws could become more stringent, which could lead to greater compliance costs and increasing risks and penalties associated with violations. For example, changes to, or restrictions on, permitting requirements or processes, hazardous or radioactive material storage or handling might require an unplanned capital investment or relocation. If we or our service providers fail to comply with existing or new environmental laws or regulations, our business, financial condition and results of operations could be materially adversely affected.

Environmental / Social - Risk 2

Our failure to comply with radiation safety or radio frequency regulations in a specific country or region could impair our ability to commercially distribute and market C-Scan in that country or region.

C-Scan includes a small X-ray source and wireless radio frequency transmitter and receiver, and is therefore subject to equipment authorization requirements in a number of countries and regions. In the United States, the EU and Japan, authorities often require advance clearance of all radiation and radio frequency devices before they can be sold or marketed in these jurisdictions, subject to limited exceptions. Competent authorities for such additional approval requirements include the Swiss National Cooperative for the Disposal of Radioactive Waste (Nagra) and the German Federal Office for Radiation Protection (Bundesamt für Strahlenschutz, BfS). Modifications to the approved C-Scan version design and specifications may require new or further regulatory clearances or approvals before we are permitted to market and sell a modified C-Scan version. If we are unable to obtain any required clearances or approvals from the authorities responsible for the radiation as well as the radio frequency regulations in these and other jurisdictions, the sale or use of C-Scan could be prevented in these countries. Any such action could negatively affect our business, financial condition and results of operations.

Environmental / Social - Risk 3

Our failure to comply with the necessary regulatory approval regarding the use of radioactive materials could significantly impair our ability to develop, manufacture and/or sell C-Scan.

The manufacture of C-Scan requires the use and storage of radioactive materials. In order to use such materials in the development and manufacture of C-Scan in Israel, we are required to obtain a permit from the Israeli Commissioner for Environmental Radiation, or the Commissioner, pursuant to the Israeli Pharmaceutical Regulations (Radioactive Elements and By-Products), 5740–1980. Should we fail to comply with the conditions of our currently existing permit, the Commissioner would have authority to cancel our permit. Should the Commissioner determine that our activities or facilities , or the activities or facilities adjacent to our premises, constitute a danger to the health and well-being of a person, the public or the environment, the cancellation or suspension of our permit could be immediate and without prior notice. Furthermore, we cannot guarantee the annual renewal of our permit and/or annual renewal subject to identical conditions, as the approval of an annual application and the conditions thereof are at the discretion of the Commissioner. Similar requirements and regulations may apply to the manufacture of C-Scan in other countries. Cancellation of or failure to renew our permit could have materially adverse consequences on our ability to manufacture and sell our products and therefore on our ability to continue our business and operations.

Environmental / Social - Risk 4

Federal and state privacy laws, and equivalent laws of third countries, may increase our costs of operation and expose us to civil and criminal sanctions.

The Health Insurance Portability and Accountability Act of 1996, as amended, and the regulations that have been issued under it, to which we refer collectively as HIPAA, and similar laws outside the United States, contain substantial restrictions and requirements with respect to the use and disclosure of individuals’ protected health information. The HIPAA privacy rules prohibit “covered entities,” such as healthcare providers and health plans, from using or disclosing an individual’s protected health information, unless the use or disclosure is authorized by the individual or is specifically required or permitted under the privacy rules. Under the HIPAA security rules, covered entities must establish administrative, physical and technical safeguards to protect the confidentiality, integrity and availability of electronic protected health information maintained or transmitted by them or by others on their behalf. While we do not believe that we are a covered entity under HIPAA, many of our customers are covered entities subject to HIPAA. Such customers may require us to enter into business associate agreements, which will obligate us to safeguard certain health information we obtain in the course of our relationship with them, restrict the manner in which we use and disclose such information and impose liability on us for failure to meet our contractual obligations. In addition, under The Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, which was signed into law as part of the U.S. stimulus package in February 2009, certain of HIPAA’s privacy and security requirements are now also directly applicable to “business associates” of covered entities and subject them to direct governmental enforcement for failure to comply with these requirements. We may be deemed as a “business associate” of some of our customers. As a result, we may be subject as a “business associate” to civil and criminal penalties for failure to comply with applicable privacy and security rule requirements. Moreover, HITECH created a new requirement obligating “business associates” to report any breach of unsecured, individually identifiable health information to their covered entity customers and imposes penalties for failing to do so. In addition to HIPAA, most U.S. states have enacted patient confidentiality laws that protect against the disclosure of confidential medical information, and many U.S. states have adopted or are considering adopting further legislation in this area, including privacy safeguards, security standards, and data security breach notification requirements. These U.S. state laws, which may be even more stringent than the HIPAA requirements, are not preempted by the federal requirements, and we are therefore required to comply with them to the extent they are applicable to our operations. These and other possible changes to HIPAA or other U.S. federal or state laws or regulations, or comparable laws and regulations in countries where we conduct business, could affect our business and the costs of compliance could be significant. Failure by us to comply with any of the standards regarding patient privacy, identity theft prevention and detection, and data security may subject us to penalties, including civil monetary penalties and in some circumstances, criminal penalties. In addition, such failure may damage our reputation and adversely affect our ability to retain customers and attract new customers. The protection of personal data, particularly patient data, is subject to strict laws and regulations in many countries. The collection and use of personal health data in the EU is governed by the General Data Protection Regulation Reg. EU 2016/679, which became applicable on May 25, 2018, or the GDPR. The GDPR imposes a number of requirements, including an obligation to seek the consent of individuals to whom the personal data relate, the information that must be provided to the individuals, notification of data processing obligations to the competent national data protection authorities of individual EU Member States and the security and confidentiality of the personal data. The GDPR also imposes strict rules on the transfer of personal data out of the EU to the U.S. Failure to comply with the requirements of the GDPR and the related national data protection laws of the EU Member States may result in fines and other administrative penalties and harm our business. We may incur extensive costs in ensuring compliance with these laws and regulations, particularly if we are considered to be a data controller within the meaning of the GDPR.

Finance & Corporate

Total Risks: 16/70 (23%)Below Sector Average

Share Price & Shareholder Rights9 | 12.9%

Share Price & Shareholder Rights - Risk 1

Your rights and responsibilities as a shareholder are governed by Israeli law, which differ in some material respects from the rights and responsibilities of shareholders of U.S. companies.

The rights and responsibilities of the holders of our ordinary shares are governed by our amended articles of association and by Israeli law. These rights and responsibilities differ in some material respects from the rights and responsibilities of shareholders in U.S. based corporations. In particular, a shareholder of an Israeli company has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards the company and other shareholders, and to refrain from abusing its power in the company, including, among other things, in voting at a general meeting of shareholders on matters such as amendments to a company’s articles of association, increases in a company’s authorized share capital, mergers and acquisitions and certain related party transactions requiring shareholder approval under Israeli law. In addition, a controlling shareholder of an Israeli company or a shareholder who is aware that it possesses the power to determine the outcome of a shareholder vote or to appoint or prevent the appointment of a director or executive officer in the company or has other powers towards the company, has a duty of fairness toward the company. There is limited case law available to assist us in understanding the nature of this duty or the implications of these provisions. These provisions may be interpreted to impose additional obligations and liabilities on holders of our ordinary shares that are not typically imposed on shareholders of U.S. corporations.

Share Price & Shareholder Rights - Risk 2

Provisions of Israeli law and our amended articles of association may delay, prevent or otherwise impede a merger with, or an acquisition of, us, even when the terms of such a transaction are favorable to us and our shareholders.

Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to such types of transactions. For example, a full tender offer for all of a public company’s issued and outstanding shares can only be completed if the acquirer receives positive responses from the holders of at least 95% of the issued share capital and the approval of a majority of the offerees that do not have a personal interest in the tender offer, unless at least 98% of the company’s outstanding shares are tendered. Furthermore, the shareholders, including those who indicated their acceptance of the tender offer (unless the acquirer stipulated in its tender offer that a shareholder that accepts the offer may not seek appraisal rights), may, at any time within six months following the completion of the tender offer, petition an Israeli court for an appraisal right, to alter the consideration for the acquisition. In addition, a statutory merger may not be consummated unless at least 50 days have passed from the date on which a proposal for approval of the merger was filed by each party with the Israeli Registrar of Companies and at least 30 days have passed from the date on which the merger was approved by the shareholders of each party.

Share Price & Shareholder Rights - Risk 3

Our ordinary shares could be delisted from the Nasdaq Capital Market.

Nasdaq has established certain standards for the continued listing of a security on the Nasdaq Capital Market. The standards for continued listing include, inter alia, that the minimum bid price for the listed securities be at least $1.00 per share. Under these rules, a security is considered deficient if it fails to achieve at least a $1.00 closing bid price for a continuous period of 30 business days. On June 5, 2020, we announced that we received a notification from the Nasdaq Listing Qualifications, or the Staff, that we are not in compliance with the minimum bid price requirement for continued listing set forth in Listing Rule 5550(a)(2), which requires listed securities to maintain a minimum bid price of $1.00 per share, or the Minimum Bid Price Requirement. Further, on April 16, 2020, in response to the COVID-19 pandemic, and the resulting related market conditions, Nasdaq elected to provide temporary relief from the bid price requirements by tolling compliance through June 30, 2020. As a result of the tolling of the bid price requirements, we had 180 calendar days from July 1, 2020, or until December 28, 2020, to regain compliance with the minimum bid price requirement. On December 29, 2020, we received a letter from the Staff notifying us that Nasdaq granted us a 180-day extension, until June 28, 2021, or the Extension Period, to regain compliance with the Minimum Bid Price Requirement. We did not regain compliance with the minimum bid price requirement before December 28, 2020, and instead we advised Nasdaq of our intent to cure the deficiency within the Extension Period. On January 26, 2021 following the increase of the share price in Nasdaq during January 2021, we were notified by Nasdaq that we regained compliance with the minimum $1.00 bid price rule. On December 23, 2021, we received a letter from the Staff, indicating that the Company is not in compliance with the Minimum Bid Price Requirement. We were provided by Nasdaq with a compliance period of 180 calendar days (i.e., until June 21, 2022) in which to regain compliance pursuant to Nasdaq Listing Rules. We are able to regain compliance, if at any time during such 180 day period, the closing bid price of our ordinary shares is at least $1.00 for a minimum of ten consecutive business days. In the event we do not regain compliance after the initial 180-day period, we may then be eligible for an additional time if we meets the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and will need to provide written notice of our intention to cure the deficiency during the second compliance period. If we are delisted from Nasdaq, our ordinary shares may be eligible for trading on an over-the-counter market in the United States. In the event that we are not able to obtain a listing on another U.S. stock exchange or quotation service for our ordinary shares, it may be extremely difficult or impossible for shareholders to sell their ordinary shares in the United States. Moreover, if we are delisted from Nasdaq, but obtain a substitute listing for our ordinary shares in the United States, it will likely be on a market with less liquidity, and therefore, experience potentially more price volatility than experienced on Nasdaq. Shareholders may not be able to sell their ordinary shares on any such substitute U.S. market in the quantities, at the times, or at the prices that could potentially be available on a more liquid trading market. As a result of these factors, if our ordinary shares are delisted from Nasdaq, the price of our ordinary shares is likely to decline. A delisting of our ordinary shares from Nasdaq could also adversely affect our ability to obtain financing for our operations and/or result in a loss of confidence by investors, or employees.

Share Price & Shareholder Rights - Risk 4

As a foreign private issuer, we are permitted, to follow, and follow certain home country corporate governance practices instead of otherwise applicable Nasdaq requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.

As a foreign private issuer, we are permitted to follow certain home country corporate governance practices instead of those otherwise required under the Listing Rules of the Nasdaq Stock Market for domestic U.S. issuers. For instance, we follow home country practice in Israel with regard to, among other things, director nomination procedures, the approval of compensation of officers and quorum requirements at general meetings of our shareholders. In addition, we follow our home country law instead of the Listing Rules of the Nasdaq Stock Market that require us to obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity based compensation plans, an issuance that will result in a change of control of the company, certain transactions other than a public offering involving issuances of a 20% or greater interest in the company, and certain acquisitions of the stock or assets of another company. Following our home country governance practices as opposed to the requirements that would otherwise apply to a United States company listed on Nasdaq may provide less protection to you than what is accorded to investors under the Listing Rules of the Nasdaq Stock Market applicable to domestic U.S. issuers.

Share Price & Shareholder Rights - Risk 5

If we lose our status as a foreign private issuer under the SEC’s rules, our compliance costs will increase.

We would lose our foreign private issuer status if more than 50 percent of our outstanding voting securities are directly or indirectly held of record by residents of the United States and if a majority of our directors or executive officers are U.S. citizens or residents and we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. Although we have elected to comply with certain U.S. regulatory provisions, our loss of foreign private issuer status would make such provisions mandatory. The regulatory and compliance costs for us under U.S. securities laws as a U.S. domestic issuer may be significantly higher. If we are not a foreign private issuer, we will be required to file periodic reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. We would also be required to follow U.S. proxy disclosure requirements, including the requirement to disclose more detailed information about the compensation of our senior executive officers on an individual basis. We may also be required to modify certain of our policies to comply with corporate governance practices associated with U.S. domestic issuers. Such conversion and modifications will involve additional costs. In addition, we may lose our ability to rely upon exemptions from certain corporate governance requirements on U.S. stock exchanges that are available to foreign private issuers.

Share Price & Shareholder Rights - Risk 6

If securities or industry analysts do not publish research or reports about us or our business or publish unfavorable research about us or our business, the price of our securities and their trading volume could decline.

The trading market for our securities will depend in part on the research and reports that securities or industry analysts publish about us or our business. We currently have limited research coverage by securities and industry analysts. If one or more of the analysts who covers us downgrades our securities, the price of our securities would likely decline. We do not have control over these analysts and we do not have commitments from them to continue to write research reports about us or our business. The price of our ordinary shares could decline if one or more equity research analysts downgrade our ordinary shares or if those analysts issue other unfavorable commentary or cease publishing reports about us or our business.

Share Price & Shareholder Rights - Risk 7

Our stock price has and may be subject to fluctuation, and purchasers of our securities could incur substantial losses.

Our stock price has been subject to considerable fluctuation since our initial public offering in February 2015, with the closing price per share having varied from a low of $0.264 to a high of $70.56, and may be subject to fluctuation in the future. The stock market in general has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may not be able to sell their securities at or above the purchase price. The market price for our ordinary shares on the Nasdaq Capital Market may fluctuate as a result of a number of factors, some of which are beyond our control, including, among others: • we may not be able to develop C-Scan at the rate or to the stage we desire; • inability to obtain the approvals necessary to commence further clinical trials; • unsatisfactory results of clinical trials; • announcements of regulatory approval or the failure to obtain it, or specific label indications or patient populations for its use, or changes or delays in the regulatory review process; • any intellectual property infringement actions in which we may become involved; • announcements concerning our competitors or the medical device industry in general; • achievement of expected product sales and profitability or our failure to meet expectations; • our commencement of, or involvement in, litigation; • any major changes in our board of directors or management; • legislation in the United States relating to the sale or pricing of medical device; • future substantial sales of our ordinary shares; • changes in earnings estimates or recommendations by securities analysts, if our ordinary shares are covered by analysts; • the trading volume of our ordinary shares; or • natural disasters and political and economic instability, including wars, terrorism, political unrest, results of certain elections and votes, emergence of a pandemic, or other widespread health emergencies (or concerns over the possibility of such an emergency, including for example, the COVID-19 pandemic), boycotts, adoption or expansion of government trade restrictions, and other business restrictions. In addition, the stock market in general, and Nasdaq Stock Market in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of small companies. Broad market and industry factors may negatively affect the market price of our ordinary shares, regardless of our actual operating performance. Further, a systemic decline in the financial markets and related factors beyond our control may cause our share price to decline rapidly and unexpectedly.

Share Price & Shareholder Rights - Risk 8

The trading market for our ordinary shares is not always active, liquid and orderly, which may inhibit the ability of our shareholders to sell ordinary shares.

Since our initial public offering in February 2015, the trading market for our ordinary shares has not always been active, liquid or orderly. The lack of an active market at times may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value of your shares. An inactive market may also impair our ability to raise capital by selling shares.

Share Price & Shareholder Rights - Risk 9

We recently amended our articles of association to increase our authorized share capital. There are certain risks associated with this increase.

In December 2020, our shareholders approved an increase to our authorized share capital and to amend our Articles of Association accordingly. As a result, our authorized and registered share capital is NIS 864,000,000 divided into 360,000,000 ordinary shares, nominal (par) value NIS 2.40 each. The increase of our authorized share capital is designed to enable us to have sufficient authorized share capital that would allow us to meet our future business needs as they arise. These needs could include, among other things, the sale of shares in public and private offerings to raise additional capital, the purchase of property or assets, the use of shares for various equity compensation and other employee benefit plans and arrangements, the declaration of share splits, and other bona fide corporate purposes. The possible future issuance of equity securities consisting of ordinary shares or securities convertible into ordinary shares could affect our current shareholders in a number of ways, including the following: (i) diluting the voting power of the current holders of ordinary shares; (ii) diluting the market price of the ordinary shares, to the extent that the new ordinary shares are issued and sold at prices below current trading prices of the existing ordinary shares, or if the issuance consists of equity securities convertible into ordinary shares, to the extent that the securities provide for the conversion into ordinary shares at prices that could be below current trading prices of the ordinary shares; and (iii) diluting the book value per share of the outstanding ordinary shares. Furthermore, the authorized shares could, in theory, also be used to resist or frustrate a third-party transaction that is favored by a majority of the independent shareholders (for example, by permitting issuances that would dilute the share ownership of a person seeking to effect a change in the composition of our board of directors or management or contemplating a tender offer or other transaction for the combination of our company with another company).

Accounting & Financial Operations3 | 4.3%

Accounting & Financial Operations - Risk 1

If we fail to maintain effective internal control over financial reporting, the price of our ordinary shares may be adversely affected.

Our internal control over financial reporting may have weaknesses and conditions that could require correction or remediation, the disclosure of which may have an adverse impact on the price of our ordinary shares. We are required to establish and maintain appropriate internal control over financial reporting. Failure to establish those controls, or any failure of those controls once established, could adversely affect our public disclosures regarding our business, prospects, financial condition or results of operations. In addition, management’s assessment of internal control over financial reporting may identify weaknesses and conditions that need to be addressed in our internal control over financial reporting or other matters that may raise concerns for investors. Additionally, as of December 31, 2020, we are no longer an “emerging growth company,” as defined in the JOBS Act, and must include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm according to Section 404(b) of the Sarbanes-Oxley Act. If our independent registered public accounting firm is unable to express an opinion or issues an adverse opinion in its attestation as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the trading price of our ordinary shares could be negatively affected. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting or disclosure of management’s assessment of our internal control over financial reporting may have an adverse impact on the price of our ordinary shares.

Accounting & Financial Operations - Risk 2

We have never declared or paid a dividend and currently do not intend to pay cash dividends in the foreseeable future. Any return on investment may be limited to the value of our securities.

We have never declared and do not anticipate paying cash dividends on our ordinary shares in the foreseeable future. Our board of directors has discretion to declare and pay dividends on our ordinary shares and will make any determination to do so based on a number of factors, such as our operating results, financial condition, current and anticipated cash needs and other business and economic factors that our board of directors may deem relevant. In addition, we are only permitted to pay dividends out of “profits” (as defined by the Israeli Companies Law, 1999, or the Israeli Companies Law), provided that there is no reasonable concern that the dividend distribution will prevent us from meeting our existing and foreseeable obligations, as they become due. If we do not pay dividends, our ordinary shares may be less valuable because a return on your investment will only occur if the trading price of our securities appreciates. Further, you should not rely on an investment in us if you require dividend income from your investments.

Accounting & Financial Operations - Risk 3

We have a history of losses, may incur future losses and may not achieve profitability.

We are a clinical and development-stage medical diagnostics company with a limited operating history. We have incurred net losses in each fiscal year since we commenced operations in 2009. We incurred net losses of $17.2 million in 2021 and $13.8 million in 2020. As of December 31, 2021, our accumulated deficit was $108.2 million. We expect our losses to continue for the foreseeable future as we continue our investment in research and development and clinical trials to complete the development of our technology and to attain regulatory approvals, manufacturing scale up, begin the commercialization efforts for C-Scan, increase our marketing and selling expenses, and incur additional costs as a result of being a public company in the United States. Successful completion of our development program and, ultimately, the attainment of profitable operations is dependent upon future events, including obtaining adequate financing to fulfill our development activities and our ability to manufacture commercial quantities of C-Scan at an acceptable cost and generate significant revenues. The extent of our future operating losses and the timing of becoming profitable are highly uncertain, and we may never achieve or sustain profitability.

Debt & Financing2 | 2.9%

Debt & Financing - Risk 1

We will require additional funding in order to complete the development and commercialization of C-Scan, which may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to C-Scan or intellectual property. If additional capital is not available, we may have to delay, reduce or cease the development or commercialization of C- Scan.

Our operations have consumed substantial amounts of cash. We expect that we will need to continue to raise and spend substantial amounts in order to complete the clinical development, regulatory approval and commercialization of C-Scan. We intend to use our cash resources, including the proceeds of our July 2021 and March 2022 registered direct offerings and the proceeds received from the warrants exercise by certain warrants holders during the first quarter of 2021, to finance these efforts and believe that we have sufficient capital to fund our ongoing operations and plans including the U.S. pivotal study, into the first quarter of 2024. We will therefore need to raise additional funds to obtain the required capital prior to completing the development and commercialization of C-Scan (see Item 5B “Operating and Financial Review and Prospects — Liquidity and Capital Resources — Sources of Liquidity”). We may seek additional funding through equity offerings, debt financings, collaborations, licensing arrangements or any other means to conduct clinical trials and develop, manufacture and market C-Scan or for our general corporate purposes. Securing additional financing may divert our management’s attention from its day-to-day activities, which may adversely affect our ability to develop and commercialize C-Scan. Additional financing may not be available to us on a timely basis on terms acceptable to us, or at all. In addition, if we raise additional funds by issuing equity securities, you may experience significant dilution of your ownership interest and the newly issued securities may have rights senior to those of the holders of our ordinary shares. In addition, the issuance of additional equity securities by us, or the possibility of such issuance, may cause the market price of our ordinary shares to decline. Alternatively, if we raise funds by obtaining loans from third parties, the terms of those financing arrangements may include negative covenants, may require us to grant a lender a security interest in our assets or may include other restrictions on our business that could impair our operational flexibility, and could also result in interest expense. If we raise additional funds through collaborations, licensing arrangements or other structured financing transactions, we may relinquish rights to certain of our technologies or products, grant security interests in our assets or grant licenses to third parties on terms that are unfavorable to us. If adequate additional financing on acceptable terms is not available, we may not be able to develop C-Scan at the rate or to the stage we desire, and we may have to delay or abandon the commercialization of C-Scan. Any of these factors could materially adversely affect our business, financial condition and results of operations.

Debt & Financing - Risk 2

We have broad discretion in how we use the net proceeds from our financings, and we may not use these proceeds effectively.

Our management has broad discretion as to the application of the net proceeds of our financings. Our shareholders may not agree with the manner in which our management chooses to allocate and spend the net proceeds. Moreover, our management may use the net proceeds for corporate purposes that may not increase our profitability or our market value.

Corporate Activity and Growth2 | 2.9%

Corporate Activity and Growth - Risk 1

We have and will continue to incur significant costs as a result of operating as a public company in the United States, and our management is required to devote substantial time to compliance initiatives.

As a public company whose securities are traded in the United States, we have and will continue to incur significant legal, accounting and other expenses. The Sarbanes-Oxley Act of 2002, as well as rules and regulations implemented by the U.S. Securities and Exchange Commission and the Nasdaq Stock Market, impose various requirements on public companies, including requiring the establishment and maintenance of effective disclosure and financial controls. As a result, we incurred and will continue to incur additional legal, accounting and other expenses that we did not incur as a privately-held company, particularly since, as of December 31, 2020, we are no longer considered an “emerging growth company” as defined in the JOBS Act and we must include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. Our management and other personnel devote a substantial amount of time to these compliance initiatives. Changes in the laws, rules and regulations affecting public companies would result in increased costs to us as we respond to their requirements. These rules and regulations could make it more difficult or more expensive for us to obtain certain types of insurance, including director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantial costs to obtain or maintain the same or similar coverage. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers. We cannot predict or estimate the amount or timing of additional costs we may incur in order to comply with such requirements.

Corporate Activity and Growth - Risk 2

We may not be successful in establishing and maintaining strategic partnerships, which could adversely affect our ability to develop and commercialize C-Scan.

A part of our strategy is to evaluate and, as deemed appropriate, enter into partnerships in the future when strategically attractive, including potentially with major medical device companies. We face significant competition in seeking appropriate partners for C-Scan, and the negotiation process is time-consuming and complex. In order for us to successfully partner C- Scan, potential partners must view C-Scan as economically valuable in markets they determine to be attractive in light of the terms that we are seeking and other available products for licensing by other companies. Even if we are successful in our efforts to establish strategic partnerships, the terms that we agree upon may not be favorable to us, and we may not be able to maintain such strategic partnerships if, for example, development or approval of a product is delayed or sales of an approved product are disappointing. Any delay in entering into strategic partnership agreements related to C-Scan could delay the development and commercialization of our product candidates and reduce their competitiveness even if they reach the market. In addition, our strategic partners may breach any future agreement with us, and we may not be able to adequately protect our rights under these agreements. Furthermore, our strategic partners will likely negotiate for certain rights to control decisions regarding the development and commercialization of C-Scan, if approved, and may not conduct those activities in the same manner as we would do so. If we fail to establish and maintain strategic partnerships related to C-Scan, we will bear all the risks and costs related to the development and commercialization of C-Scan, and we will need to seek additional financing, hire additional employees and otherwise develop expertise which we do not have and for which we have not budgeted.

Tech & Innovation

Total Risks: 13/70 (19%)Below Sector Average

Innovation / R&D5 | 7.1%

Innovation / R&D - Risk 1

The results of our current or future clinical trials may not support our product candidate requirements or intended use claims or may result in the discovery of adverse side effects.

Even if our current or future clinical trials are completed as planned, we cannot be certain that their results will support our product requirements or intended use claims, which could inhibit our marketing strategies, or that the FDA, foreign authorities or our Notified Body will agree with our conclusions regarding them. Success in non-clinical studies and early clinical trials does not ensure that later clinical trials will be successful, and we cannot be sure that clinical trials will replicate the results of prior trials. The clinical trial process may fail to demonstrate that C- Scan, or any future products, are safe and effective for the desired or proposed indicated uses, which could cause us to abandon a product and may delay development of others. Any delay or termination of our clinical trials will delay the filing of our product submissions and, ultimately, our ability to commercialize C-Scan, or any future products, and generate revenues. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’s profile.

Innovation / R&D - Risk 2

If the indications for use or instructions for use for which the iodinated oral contrast medium is approved are not sufficiently broad to support its use prior to the ingestion of our capsules, the FDA or the competent regulatory authorities in the European Union (EU) Member States and other foreign countries may consider that contrast agent is being used off-label.

Ingestion of C-Scan requires the preparatory use of iodinated oral contrast medium to provide a coating for colonic imaging. We cannot be sure that the indications for which iodinated oral contrast medium are approved in the United States, or in other countries is sufficiently broad to cover such use. If the FDA or the competent regulatory authorities in other countries consider that iodinated oral contrast medium is not approved for the purpose for which it is used with the system, we may be considered to promote the off-label use of the iodinated oral contrast medium. Because the promotion of off-label use of drugs or medicinal products is prohibited in the United States, and in other countries, we could face both related issues with the FDA and/or the competent authorities of and/or other countries. In these circumstances, the FDA and/or the competent regulatory authorities and/or other countries may require us to obtain appropriate regulatory approvals for the iodinated oral contrast medium prior to marketing C-Scan with such substances. Under such circumstances, should we fail to obtain approval of the contrast agent for use with C-Scan, in a timely fashion, or at all, this could delay or prevent regulatory clearance or approval of the C-Scan, and our business and financial condition will be adversely affected.

Innovation / R&D - Risk 3

If we are unable to successfully complete clinical trials with respect to C-Scan, we may be unable to receive regulatory approvals or clearances for C-Scan and/or our ability to achieve market acceptance of C-Scan will be harmed.

The development of the C-Scan system requires the submission of data generated from clinical trials, which can be long, expensive and uncertain processes, subject to delays and failure at any stage. The data obtained from the studies and trials may be inadequate to support regulatory clearances or approvals, or equivalent third-country approval, or to allow market acceptance of the products being studied. C-Scan technology is currently undergoing clinical development and clinical trials. To date, we have performed clinical studies with several versions of C-Scan including several versions of our non-scanning capsules. The development of sufficient and appropriate clinical protocols to demonstrate safety, clinical performance and clinical effectiveness are required, and we may not adequately develop such protocols to support clearance, approval, or equivalent third country approval. The clinical trials that were conducted using prior versions of C-Scan, were conducted under differing protocols, used groups of patients different and/or smaller in size from those we intend to study in future clinical trials with future versions of C-Scan, and the results from such clinical trials were subject to human interpretations and based on statistical assumptions that could be affected by erroneous considerations. Further, the FDA, the competent regulatory authorities of other countries, or our Notified Body in the EU may require us to submit data on a greater number of patients than we originally anticipated and/or for a longer follow-up period or they may change the data collection requirements or data analysis applicable to our clinical trials. The commencement or completion of any of our clinical studies or trials may be delayed or halted, or be inadequate to support regulatory clearance, approval or product acceptance, or equivalent third country approval, for numerous reasons, including, among others: • patients do not enroll in the clinical trial at the rate we expect; • patients do not comply with trial protocols; • patient follow-up is not at the rate we expect; • patients experience severe adverse side effects, including damage to the colon wall or related to excessive radiation exposure as a result of capsule malfunction or break down or retention and may require to undergo a surgical procedure; • patient death during a clinical trial, even though their death may be unrelated to our product; • FDA, institutional review boards, or IRBs, or other regulatory authorities do not approve a clinical trial protocol or a clinical trial, or place a clinical trial on hold; • IRBs, Ethics Committees and third-party clinical investigators may delay or reject our trial protocol and Informed Consent Form; • third-party clinical investigators decline to participate in a study or trial or do not perform a study or trial on our anticipated schedule or consistent with the investigator agreements, study or trial protocol, good clinical practices, quality of clinical data or other FDA or IRBs, Ethics Committees, or any other applicable requirements; • third-party organizations do not perform data collection, monitoring and analysis in a timely or accurate manner or consistent with the study or trial protocol or investigational or statistical plans; • regulatory inspections of our studies, trials or manufacturing facilities may require us to, among other things, undertake corrective action or suspend or terminate our studies or clinical trials; • changes in governmental regulations or administrative actions; • we may not be able to develop C-Scan at the rate or to the stage we desire; • the interim or final results of the study or clinical trial are inconclusive or unfavorable as to safety or efficacy; • a regulatory agency or our Notified Body concludes that our trial design is or was inadequate to demonstrate safety and efficacy; and • the capsule disposal was not authorized by regulatory agencies or patients failed to collect the capsule following procedure completion; and • loss of clinical data; and • a health epidemic, pandemic or other outbreak, including the current COVID-19 pandemic. The results of non-clinical and clinical studies do not necessarily predict future clinical trial results, and predecessor clinical trial results may not be repeated in subsequent clinical trials. Additionally, the FDA and/or other third country regulatory entities may disagree with our interpretation of the data from our non-clinical studies and clinical trials, or may find the clinical trial design, conduct or results inadequate to demonstrate safety or efficacy, and may require us to pursue additional non-clinical studies or clinical trials, which could further delay the clearance, approval of our products. The data we collect from our non-clinical testing, and other clinical trials may not be sufficient to support regulatory clearance and approval.

Innovation / R&D - Risk 4

We may not succeed in completing the development of our product, achieve manufacturing stability and capacity, demonstrate sufficient clinical evidence or commercialize our product and generate significant revenues.

Since commencing our operations, we have focused on the research and development and limited clinical trials of C-Scan. Although we have received a CE-certificate from our notified body (DEKRA - 0344) according to the EU Regulation 2017/745 on Medical Devices for the marketing and sale of C-Scan in the European Union, valid until December 1, 2026, we have not commenced marketing and sales in the European Union and may require additional regulatory approval in Member States of the European Union, for instance from the German Federal Office for Radiation Protection (Bundesamt für Strahlenschutz, BfS) before we can commence marketing and sale of C-Scan such states. Furthermore, we may require additional regulatory certifications, registrations and/or approvals from regulatory authorities in European jurisdictions outside the European Union, including with the UK Medicines and Healthcare Products Regulatory Agency and the Swiss National Cooperative for the Disposal of Radioactive Waste (Nagra). In Israel, we received approval from the Medical Devices and Accessories Division of the Israeli Ministry of Health, or AMAR, for the marketing and sale of C-Scan in Israel. Following the approval we received from our notified body according to the EU Regulation 2017/745, the AMAR approval was renewed and is valid until December 31, 2022. We have not received approvals in other jurisdictions, including the United States, and there can be no assurance that we will be able to receive regulatory approvals to commence marketing and sales for C-Scan in the foreseeable future or ever. Our ability to generate revenues and achieve profitability depends on our ability to successfully complete the development of our C-Scan product, demonstrate sufficient clinical evidence, obtain required regulatory approvals and commercial licenses, manufacture commercial quantities of C-Scan at an acceptable cost to enable us to generate significant revenues. The future success of our business cannot be determined at this time, and we do not anticipate generating significant revenues from product sales for the foreseeable future. In addition, we have no experience in commercializing C-Scan and may face a number of challenges with respect to our commercialization efforts, including, among others, that: • we may not have adequate financial or other resources to complete the development of our product, demonstrate adequate clinical results, attain required regulatory approvals and licensures, obtain adequate manufacturing and capacity and begin the commercialization efforts for C-Scan; • we may fail to obtain or maintain required regulatory approvals and licensures for C-Scan in our target markets or may face adverse regulatory or legal actions relating to our system even if regulatory approval is obtained; • we may not demonstrate adequate clinical safety and clinical effectiveness results from our current or future versions of C-Scan, to support regulatory body approval or market acceptance and adoption; • we may face ongoing limitations imposed by the Nuclear Regulatory Commission, or NRC, or other nuclear regulatory commissions in jurisdictions in which we intend to commercialize C-Scan in relation to the disposal of our C-Scan Cap in the sanitary system, such as requiring patients to retrieve our C-Scan Cap after use, which could impact enrollment pace in our clinical studies and make C-Scan less attractive; • we may not be able to maintain an adequate supply chain due to reliance on single or sole suppliers for critical components and scale up the manufacture of C-Scan to commercial quantities at an adequate quality or at an acceptable cost; • we may not be able to establish adequate sales, marketing and distribution channels; • healthcare professionals and patients may not accept C-Scan; • we may not be aware of possible complications from the continued use of C-Scan because we have limited clinical experience with respect to the actual use of C-Scan; • other technological breakthroughs in colorectal cancer, or CRC, screening, treatment and prevention may reduce the demand for C-Scan; • changes in the market for CRC screening, new alliances between existing market participants and the entrance of new market participants may interfere with our market penetration efforts; • government and private third-party payors may not agree to provide coding, coverage and payment adequate to reimburse healthcare providers and patients for any or all of the purchase price in conjunction with clinical effectiveness of C-Scan, which may adversely affect healthcare providers’ and patients’ willingness to purchase C-Scan; • uncertainty as to market demand may result in inefficient pricing of C-Scan; • we may not be able to adequately protect our intellectual property or may face third-party claims of intellectual property infringement; and • we are dependent upon the results of ongoing clinical studies relating to C-Scan which may impact its perceived value as against competing products. If we are unable to meet any one or more of these challenges successfully, our ability to effectively commercialize C-Scan could be limited, which in turn could have a material adverse effect on our business, financial condition and results of operations.

Innovation / R&D - Risk 5

Clinical failure can occur at any stage of clinical development. Our clinical experience to date does not necessarily predict future results and may not have revealed certain potential limitations of the technology and potential complications from C-Scan and may require further clinical validation. Any product version we advance through clinical trials may not have favorable results in later clinical trials or receive regulatory approval.

Clinical failure can occur at any stage of clinical development. To date, we have performed clinical studies with iterative versions of both scanning and non-scanning capsules, in conjunction with iterative versions of the C-Scan Track systems and the C-Scan View application and we are continuing to develop further iterative versions of our C-Scan Cap and C-Scan Track. Our clinical trials have been conducted under differing protocols, while using specific inclusion criteria and enriched patient enrolment. Therefore, we have a limited ability to identify potential problems and/or inefficiencies concerning current and future versions of C-Scan in advance of its use in general and expanded groups of patients and we cannot assure you that its actual clinical performances will be satisfactory to support proposed indications and regulatory approvals and clinical acceptance and adoption, or that its use will not result in unanticipated complications. For example, in previous studies we have experienced technical failures of the C-Scan Cap and are continuously engaged in implementing a plan to ensure improved reliability in later versions. To this end, we have finalized a clinical trial protocol for a study in Israel and identified over 10 clinical trial sites to enroll up to 400 patients (both average risk and high-risk patients) and intend to shift to enrollment of average risk patients in parallel to the first stage of the pivotal study in the U.S., however, if the results of such study are not satisfactory, the commencement of our U.S. pivotal study could be delayed. In addition, as part of the amended IDE we have designed the pivotal study to include 2 stages: the first stage, aimed to support our C-Scan calibration among the average risk population, which will include up to 200 additional patients in the US. Subject to the success of this first stage study, we shall proceed to the second stage that will include up to 800 subjects and is aimed to demonstrate C-Scan performance in a statistically significant manner. However, there can be no assurance that the implementation of our plan will be successful. Furthermore, the results from laboratory, non-clinical and completed clinical studies, as well as results from our ongoing clinical trials may not be indicative of final clinical results obtained from our current C-Scan version or future versions of C-Scan on expanded screening populations. In addition, the results of our clinical trials are subject to human analyses and interpretation of the data accumulated, which could be affected by various errors due to, among others, lack of sufficient clinical experience with C-Scan, assumptions used in the statistical analysis of results, interpretation errors in the analysis of the clinical trials results, including the reconstructed images by C-Scan, or due to uncertainty in the actual efficacy of C-Scan in its current clinical stage. Therefore, the safety and efficacy of C-Scan and the clinical results to date will require further independent professional validation and require further clinical study. If C-Scan does not function as expected over time, we may not be able to develop C-Scan at the rate or to the stage we desire, we could be subject to liability claims, our reputation may be harmed, C-Scan may not achieve regulatory clearances, and C-Scan may not be widely adopted by healthcare providers and patients.

Trade Secrets7 | 10.0%

Trade Secrets - Risk 1

If we are unable to protect our intellectual property rights, our competitive position could be harmed.

Our success and ability to compete depends in large part upon our ability to protect our intellectual property. Although we have patents issued in Israel, Europe, United States, Japan, China, India, Hong Kong, Canada, South Korea, Brazil and Australia, we continue to file and prosecute in many of the same countries and additional countries. We face several risks and uncertainties in connection with our intellectual property rights, including, among others: • pending and future patent applications may not result in the issuance of patents or, if issued, may not be issued in a form that will be advantageous to us; • our issued patents may be challenged, invalidated or legally circumvented by third parties; • our patents may not be upheld as valid and enforceable or prevent the development of competitive products; • the eligibility of certain inventions related to diagnostic medicine, more specifically diagnostic methods and processes, for patent protection in the United States has been limited recently which may affect our ability to enforce our issued patents in the United States or may make it difficult to obtain broad patent protection going forward in the United States; • the eligibility to protect methods for treating humans, which is available in the US, is generally not available in other countries, for example in Europe; • for a variety of reasons, we may decide not to file for patent protection on various improvements or additional features; and • intellectual property protection and/or enforcement may be unavailable or limited in some countries where laws or law enforcement practices may not protect our proprietary rights to the same extent as the laws of the United States, the European Union, Canada or Israel. Consequently, our competitors could develop, manufacture and sell products that directly compete with our products, which could decrease our sales and diminish our ability to compete. In addition, competitors could attempt to develop their own competitive technologies that fall outside of our intellectual property rights. If our intellectual property does not adequately protect us from our competitors’ products and methods, our competitive position could be materially adversely affected.

Trade Secrets - Risk 2

Because the medical device industry is litigious, we are susceptible to intellectual property suits that could cause us to incur substantial costs or pay substantial damages or prohibit us from selling C-Scan.

There is a substantial amount of litigation over patent and other intellectual property rights in the medical device industry. Whether a product infringes a patent involves complex legal and factual issues, the determination of which is often uncertain. Searches typically performed to identify potentially infringed patents of third parties are often not conclusive and because patent applications can take many years to issue, there may be applications now pending, which may later result in issued patents which our current or future products may infringe. In addition, our competitors or other parties may assert that C-Scan and the methods it employs may be covered by patents held by them. If C-Scan or any of its components infringes a valid patent, we could be prevented from manufacturing or selling it unless we can obtain a license or redesign the product to avoid infringement. For example, in March 2021, we entered into an exclusive license agreement with the University of Missouri with respect to certain patents held by the University of Missouri that the University of Missouri claimed included background intellectual property in C-Scan. In consideration for the grant of an exclusive license to those patents in the medical field, we agreed to pay royalties ranging from $0.30 to $5.00 per C-Scan unit depending on the number of units sold up to $15,000,000 in the aggregate. Third parties may currently have, or may eventually be issued, patents on which our current or future products or technologies may infringe. A license may not always be available or may require us to pay substantial royalties. We also may not be successful in any attempt to redesign our product to avoid infringement. Infringement and other intellectual property claims, with or without merit, can be expensive and time-consuming to litigate and could divert our management’s attention from operating our business.

Trade Secrets - Risk 3

The steps we have taken to protect our intellectual property may not be adequate, which could have a material adverse effect on our ability to compete in the market.

In addition to patents, we rely on confidentiality, non-compete, non-disclosure and assignment of inventions provisions, as appropriate, with our employees, consultants, subcontractors, suppliers and clinical investigators to protect and otherwise seek to control access to, and distribution of, our proprietary information. These measures may not be adequate to protect our intellectual property from unauthorized disclosure, third-party infringement or misappropriation, for the following reasons: • the agreements may be breached, may not provide the scope of protection we believe they provide or may be determined to be unenforceable, in part or in whole; • we may have inadequate remedies for any breach; • proprietary information could be disclosed to our competitors; or • others may independently develop substantially equivalent or superior proprietary information and techniques or otherwise gain access to our trade secrets or disclose such technologies. If, for any of the above reasons, our intellectual property is disclosed or misappropriated, it could harm our ability to protect our rights and could have a material adverse effect on our business, financial condition and results of operations. Furthermore, although our employees and consultants have agreed to assign to us all rights to any intellectual property created in the scope of their employment or engagement with us and most of our current employees and consultants, have agreed to waive their economic rights with respect to our intellectual property, we cannot assure you that such claims will not be brought against us by current or former employees or consultants, despite their contractual representations and obligations toward us, or by any of the medical and/or governmental institutions that employ or engage such consultants, claiming alleged rights to our intellectual property or demanding remuneration in consideration for assigned intellectual property rights, which could result in litigation and adversely affect our business, financial condition and results of operations.

Trade Secrets - Risk 4

Third-party claims of infringement or other claims against us could require us to redesign C-Scan, seek licenses, or engage in future costly intellectual property litigation, which could negatively affect our future business and financial performance.

Substantial litigation over intellectual property rights exists in the medical device industry in general and in the medical imaging or screening sectors in particular. We expect that we may be subject to third-party infringement claims as our profile grows, we generate any future revenues, the number of competitors grows or the functionality of products and technology in different industry segments converges. For example, in March 2021, we entered into an exclusive license agreement with the University of Missouri with respect to certain patents held by the University of Missouri that the University of Missouri claimed included background intellectual property in C-Scan. In consideration for the grant of an exclusive license to those patents in the medical field, we agreed to pay royalties ranging from $0.30 to $5.00 per C-Scan unit depending on the number of units sold up to $15,000,000 in the aggregate. Third parties may currently have, or may eventually be issued, patents on which our current or future products or technologies may infringe. In addition, litigation in which we are accused of infringement may cause negative publicity, adversely impact prospective customers, cause product shipment delays, prohibit us from manufacturing, marketing or selling our current or future products, require us to develop non-infringing technology, make substantial payments to third parties or enter into royalty or license agreements, which may not be available on acceptable terms, or at all. If a successful claim of infringement were made against us and we could not develop non-infringing technology or license the infringed or similar technology in a timely and cost-effective manner, our ability to generate significant revenues may be substantially harmed and we could be exposed to significant liability. A court could enter orders that temporarily, preliminarily or permanently enjoin us, our suppliers, distributors or our customers from making, using, selling, offering to sell or importing our current or future products, or could enter an order mandating that we undertake certain remedial activities. Claims that we have misappropriated the confidential information or trade secrets of third parties can have a similar negative impact on our reputation, business, financial condition or results of operations. We may also become involved in litigation in connection with our brand name rights. We do not know whether others will assert that our brand name infringes their trademark rights. In addition, names we choose for our products may be claimed to infringe names held by others. If we have to change the names we use, we may experience a loss in goodwill associated with our brand name, customer confusion and a loss of sales.

Trade Secrets - Risk 5

Third parties may challenge the validity of our issued patents or challenge patent applications in administrative proceedings before various patent offices which, if successful, could negatively affect our future business and financial performance.

Various patent offices, including in the United States and Europe, provide administrative proceedings by which a third party can challenge the validity of an issued patent or challenge an application that is being examined absent any threat of litigation. In some instances, including in the United States, the administrative proceedings provide a more efficient and favorable forum to challenge our patents which may lead to more opportunities for competitors to do so, particularly smaller competitors with limited resources. Moreover, the standards utilized in these administrative proceedings, at least in the United States, provide certain legal advantages versus challenging the validity of a patent in a district court. If a third party is successful in one of these administrative proceedings, the patent will no longer be enforceable in the corresponding jurisdiction. With this loss in patent rights, we will not be able to prevent third parties from offering identical or similar competing products which may result in lower profits and a less substantial market share.

Trade Secrets - Risk 6

We may need to initiate lawsuits to protect or enforce our patents and other intellectual property rights, which could be expensive and, if we lose, could cause us to lose some of our intellectual property rights, which would harm our ability to compete in the market.

We rely on patents to protect a portion of our intellectual property and our competitive position. Patent law relating to the scope of claims in the technology fields in which we operate is still evolving and, consequently, patent positions in the medical device industry are generally uncertain. In order to protect or enforce our patent rights, we may initiate patent and related litigation against third parties, such as infringement suits or interference proceedings. Any lawsuits that we initiate could be expensive, take significant time and divert our management’s attention from other business concerns and the outcome of litigation to enforce our intellectual property rights in patents, copyrights, trade secrets or trademarks is highly unpredictable. Litigation also puts our patents and other registered intellectual property at risk of being invalidated or interpreted narrowly and our patent applications at risk of not being issued. In addition, we may provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, including attorney fees, if any, may not be commercially valuable. The occurrence of any of these events could have a material adverse effect on our business, financial condition and results of operations.

Trade Secrets - Risk 7

We rely on trademark protection to distinguish our products from the products of our competitors; however, if a third party is entitled to use our trademark, we could be forced to rebrand, which could result in loss of brand recognition and our ability to distinguish our products may be impaired, which could adversely affect our business.

We rely on trademark protection to distinguish our products from the products of our competitors. In jurisdictions where we have not registered our trademarks and logos and are using them, and as permitted by applicable local law, we rely on common law trademark protection. Third parties may oppose our trademark applications, or otherwise challenge our use of the trademarks, and may be able to use our trademarks in jurisdictions where they are not registered or otherwise protected by law. If our trademarks are successfully challenged or if a third party is using confusingly similar or identical trademarks in particular jurisdictions before we do, we may be prevented from using our brands and/or domain names and/or could be forced to rebrand our products, which could result in loss of brand recognition, and could require us to devote additional resources to marketing new brands. If others are able to use our trademarks, our ability to distinguish our products may be impaired, which could adversely affect our business. Further, we cannot assure you that competitors will not infringe upon our trademarks, or that we will have adequate resources to enforce our trademarks.

Cyber Security1 | 1.4%

Cyber Security - Risk 1

A security breach or disruption or failure in a computer or communications systems could adversely affect us.

Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, are vulnerable to damage from computer viruses, unauthorized access, cyber-attacks, natural disasters, fire, terrorism, war, and telecommunication and electrical failures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our clinical program. For example, the loss of clinical trial data from ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets or inappropriate disclosure of confidential or proprietary information, including protected health information or personal data of clinical trial participants or employees or former employees, access to our clinical data, or disruption of the manufacturing process, we could incur liability and the further development of C-Scan could be delayed. We may also be vulnerable to cyber-attacks by hackers or other malfeasance. This type of breach of our cybersecurity may compromise our confidential information and/or our financial information and adversely affect our business or result in legal proceedings. Further, these cybersecurity breaches may inflict reputational harm upon us that may result in decreased market value and erode public trust.

Production

Total Risks: 11/70 (16%)Above Sector Average

Manufacturing3 | 4.3%

Manufacturing - Risk 1

C-Scan may in the future be subject to product recalls that could harm our reputation, business and financial results.

The FDA and similar foreign governmental authorities have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture or a public health/safety issue. In the case of the FDA, the authority to require a recall must be based on an FDA finding that there is a reasonable probability that the device would cause injury or death. In addition, foreign governmental bodies have the authority to require the recall of our products in the event of material deficiencies or defects in design or manufacture. Manufacturers may, under their own initiative, recall a product if any material deficiency in a device is found. A government-mandated or voluntary recall by us or one of our distributors could occur as a result of component failures, manufacturing errors, design or labeling defects or other deficiencies and issues. Once marketed, recalls of any of our products, including C-Scan, would divert managerial and financial resources and have an adverse effect on our business, financial condition and results of operations. FDA requires that certain classifications of recalls be reported to the FDA within 10 working days after the recall is initiated. Companies are required to maintain certain records of recalls, even if they are not reportable to FDA. We may initiate voluntary recalls involving our products in the future that we determine do not require us to notify the FDA. If the FDA disagrees with our determinations, they could require us to report those actions as recalls. A future recall announcement could harm our reputation with customers and negatively affect our sales. In addition, the FDA could take enforcement action against us based on our failure to report the recalls when they were conducted.

Manufacturing - Risk 2

We have limited manufacturing capabilities and if we are unable to scale up our manufacturing operations to meet the necessary quantities for our upcoming clinical studies or anticipated market demand, our growth could be limited and our business, financial condition and results of operations could be materially adversely affected.

We currently have limited resources, facilities and experience in manufacturing sufficient quantities of C-Scan to meet the quantities we need for our upcoming clinical studies and the demand we may expect from commercialization efforts, if we are able to obtain regulatory clearance in the United States for C-Scan. We do not have experience in manufacturing C-Scan in the commercial quantities that we expect to require to meet demand for C-Scan, nor can we be certain of our manufacturing costs. We have in the past, and we may in the future, face certain technical challenges as we increase manufacturing capacity, including, among others, equipment design and automation, material procurement and lower than expected yields and increased scrap costs, as well as challenges related to maintaining quality control and assurance standards, manufacturing commercial quantities of C- Scan capsules at an acceptable cost and logistics associated with the handling of radioactive materials and the shelf life of our C-Scan Cap, which have resulted in and could in the future result in delays in our clinical trial and commercialization plans and lost revenue. We may be unable to establish or maintain reliable, high-volume manufacturing capacity. Even if we can establish and maintain this capacity, the cost of doing so may increase the cost of C-Scan and reduce our ability to successfully compete the effort. In addition, while we have established our own X-ray source production line in Israel to support our clinical needs and future sales in Israel and potentially in Europe, we intend to expand our in house X-ray production line to support future commercial quantities demand and may not be successful in such efforts. Despite our continuing cost-cutting efforts, including scaling-up of our manufacturing capabilities of our C-Scan capsule in commercial quantities, we may not be able to achieve adequate quality at an acceptable cost. C-Scan includes several components that are based on new technologies and are difficult to manufacture and some are being supplied to us by single source suppliers (see “Risk Factors – Risks Related to Our Business – Our reliance on single source suppliers could harm our ability to conduct clinical trials and meet demand for our product in a timely manner or within budget.”). Furthermore, we may encounter similar or unforeseen challenges initiating and later expanding production of any new products. If we are unable to scale up our manufacturing capabilities to meet market demand, our growth could be limited and our business, financial condition and results of operations could be materially adversely affected. In addition, we received and may receive in the future grants from the Government of the State of Israel through the IIA (formerly the OCS) for the financing of a portion of our research and development expenditures and to support the funding of our transition from research and development to manufacturing, pursuant to the Encouragement of Research, Development and Technological Innovation in the Industry Law 5744-1984 (formerly known as the Encouragement of Industrial Research and Development Law 5744-1984), or the Innovation Law. The terms of the IIA grants subject us to certain restrictions relating to (among other things) the transfer of the manufacturing of IIA-funded products outside Israel. See “Risk Factors – Risks Related to Our Operations in Israel – Pursuant to the terms of the Israeli government grants we received for research and development expenditures, we are obligated to pay certain royalties on our revenues to the Israeli government. In addition, the terms of Israeli government grants we received require us to satisfy specified conditions and to make additional payments in addition to repayment of the grants upon certain events.” Such restrictions may impair our ability to outsource or transfer development or manufacturing activities with respect to any product or technology outside of Israel.

Manufacturing - Risk 3

Changed

Substantially all of our operations are currently conducted at our facility in Haifa, Israel, and at our own X-ray source production line in Petach Tikva, Israel and any disruption at our facilities could materially adversely affect our business, financial condition and results of operations.

Substantially all of our operations are currently conducted at our facility in Haifa, Israel (other than certain production activities conducted by subcontractors) and at our own X-ray source production line in Petach Tikvah, Israel. We take precautions to safeguard our facilities, including obtaining insurance coverage and implementing health and safety protocols. However, a natural or other disaster, such as a fire, flood, earthquake, an armed conflict involving Israel (as detailed further under “Risks Related to Our Operations in Israel”) or a terrorist attack, could damage or destroy our facilities and our manufacturing equipment or inventory, cause substantial delays in our operations and otherwise cause us to incur additional unanticipated expenses. In addition, the insurance we maintain against fires, floods and other natural disasters and the war and terrorism insurance we maintain may not be adequate to cover our losses in any particular case. Damage to our facilities or our other property or to any of our suppliers’ facilities and properties, whether located in Israel or elsewhere, due to fire, a natural disaster or casualty event or an armed conflict or terrorist attack, could materially adversely affect our business, financial condition and results of operations.

Employment / Personnel4 | 5.7%

Employment / Personnel - Risk 1

If healthcare professionals do not recommend our product to their patients, C-Scan may not achieve market acceptance and we may not become profitable.

CRC screening candidates are generally referred by their healthcare professional to approved tests and screening technology options. If healthcare professionals, including physicians, do not recommend or prescribe our product to their patients, C-Scan may not achieve market acceptance and we may not become profitable. In addition, physicians have historically been slow to change their medical diagnostic and treatment practices because of perceived liability risks arising from the use of new products. Delayed adoption of C-Scan by healthcare professionals could lead to a delayed adoption by patients and government and private third-party payors. Healthcare professionals may not recommend or prescribe C-Scan until certain conditions have been satisfied including, among others: • there is sufficient long-term clinical and health-economic evidence to convince them to alter their existing screening methods and device recommendations; • there are recommendations from prominent physicians, educators and/or associations that C-Scan is safe and effective; • we obtain favorable data from clinical and health-economic studies for C-Scan; • reimbursement or insurance coverage from government and private third-party payors is available; • healthcare professionals obtain required approvals and licensures for the handling, storage, dispensing and disposal of C-Scan; and • healthcare professionals become familiar with the complexities of C-Scan. We cannot predict when, if ever, healthcare professionals and patients may adopt the use of C-Scan. Even if favorable data is obtained from clinical and health-economic studies for the regulatory approval of C-Scan, there can be no assurance that prominent physicians would endorse it or that future clinical studies will continue to produce favorable data regarding C- Scan. In addition, prolonged market exposure may also be a pre-requisite to reimbursement or insurance coverage from government and private third-party payors. If C-Scan does not achieve an adequate level of acceptance by patients, healthcare professionals and government and private third-party payors, we may not generate significant product revenues and we may not become profitable.

Employment / Personnel - Risk 2

If we lose our key personnel or are unable to attract and retain additional personnel, our business and ability to compete will be harmed.

Our success relies upon the continued service and performance of the principal members of our management and research and development team, including Alex Ovadia and Yoav Kimchy. In order to implement our business strategy, we will need to retain our key personnel with expertise in the areas of research and development, clinical testing, government regulation, manufacturing, finance, marketing and sales. Our product development plans depend in part on our ability to retain engineers with expertise in a variety of technical fields. Demand on the part of technology companies for the services of engineers is currently very high in Israel, with the number of open positions at risk of exceeding the number of qualified applicants. Larger companies may have a competitive advantage in hiring such engineers, due to the relatively high compensation they are able to offer. The loss of a number of these persons or our inability to attract and retain qualified personnel could harm our business and our ability to compete. We do not maintain key man insurance for Alex Ovadia or Yoav Kimchy.

Employment / Personnel - Risk 3

We may become subject to claims for payment of compensation for assigned service inventions by our current or former employees, which could result in litigation and adversely affect our business.

Under the Israeli Patents Law, 5727-1967, or the Patents Law, inventions conceived by an employee during the scope of his or her employment are regarded as “service inventions” and are owned by the employer, absent a specific agreement between the employee and employer giving the employee service invention rights. Section 134 of the Patents Law provides that if no agreement between an employer and an employee exists that prescribes whether, to what extent, and on what conditions the employee is entitled to remuneration for his or her service inventions, then such matters may, upon application by the employee, be decided by a government-appointed compensation and royalties committee established under the Patents Law, or the Committee. Although our employees have agreed to assign to us all rights to any intellectual property created in the scope of their employment and most of our current employees, including all those involved in the development of our intellectual property, have agreed to waive their economic rights with respect to service inventions, we cannot assure you that claims will not be brought against us by current or former employees demanding remuneration in consideration for assigned service inventions. If any such claims were filed, we could potentially be required to pay remuneration to our current or former employees for such assigned service inventions, or be forced to litigate such claims, which could negatively affect our business.

Employment / Personnel - Risk 4

We may not be able to enforce covenants not to compete at all or, we may be unable to enforce them for the duration contemplated in our employment contracts and may, therefore, be unable to prevent competitors from benefiting from the expertise of some of our former employees involved in research and development activities.

We currently have non-compete agreements with substantially all of our employees who are involved in research and development, all of whom are located in Israel. These agreements prohibit our employees, if they cease working for us, from directly competing with us or working for our competitors for a limited period of time following termination of employment. In many jurisdictions, courts are increasingly refusing to enforce restrictions on competition by former employees or have interpreted them narrowly. For example, in Israel, where currently all of our employees reside, courts have required employers seeking to enforce non-compete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of material interests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or its intellectual property. If we cannot demonstrate that harm would be caused to us, an Israeli court may refuse to enforce our non-compete restrictions or reduce the contemplated period of non-competition such that we may be unable to prevent our competitors from benefiting from the expertise of our former employees.

Supply Chain4 | 5.7%

Supply Chain - Risk 1

We depend on third parties to manage our clinical studies and trials, perform related data collection and analysis, and to enroll patients for our clinical trials, and, as a result, we may face costs and delays that are beyond our control.

We rely on third parties, such as third-party clinical research organizations, or CROs, clinical investigators, clinical research coordinators and clinical sites, to manage our clinical trials and perform data collection and analysis, and to enroll patients for our clinical trials. Although we have and expect to continue to have contractual arrangements with these third parties, we control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol and legal, regulatory and scientific standards, and our reliance on such third parties does not relieve us of our regulatory responsibilities. If such third parties fail to comply with applicable regulatory requirements, the clinical data generated in our clinical trials may be deemed unreliable and regulatory authorities may require us to perform additional clinical trials before approving our marketing applications, which would delay the regulatory approval process. Furthermore, we may not be able to control the amount and timing of resources that these parties devote to our studies and trials or the quality of these resources. If these third parties fail to properly manage our studies and trials or enroll patients for our clinical trials, we will be unable to complete them at all or in a satisfactory or timely manner, which could delay or prevent us from obtaining regulatory approvals for, or achieving market acceptance of, our product. In addition, termination of relationships with third parties may result in delays, inability to enter into arrangements with alternative third parties or do so on commercially reasonable terms. Switching or adding additional clinical sites involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new clinical site commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines.

Supply Chain - Risk 2

If the third parties on which we rely to conduct our clinical trials and clinical development do not perform as contractually required or expected, we may not be able to obtain regulatory clearance or approval, or equivalent third country approval for, or commercialize, C-Scan or future products.

We do not have the ability to independently conduct our clinical trials for C-Scan and we must rely on third parties, such as contract research organizations, medical institutions, clinical investigators and contract laboratories to conduct such trials. If these third parties do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, if these third parties need to be replaced, or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our non-clinical development activities or clinical trials may be extended, delayed, suspended or terminated, and we may not be able to obtain regulatory clearance, approval for, or successfully commercialize, C-Scan or future products on a timely basis, if at all, and our business, operating results and prospects may be adversely affected. Furthermore, our third-party clinical trial investigators may be delayed in conducting our clinical trials for reasons outside of their control.

Supply Chain - Risk 3

Changed

We may rely on local distributors and/or strategic partners to market and distribute C-Scan in those countries where we intend to market and distribute C-Scan.

We may rely on local distributors and/or strategic partners for the marketing and distribution of C-Scan. Our success in generating sales in countries or regions where we will engage local distributors and/or strategic partners will depend in large part on the efforts of these third parties over whom we have limited control. If we are unable to identify and engage with suitable local distributors and/or strategic partners in the countries where we intend to market and distribute C-Scan, our business, financial condition and results of operations could be negatively affected.

Supply Chain - Risk 4

Changed

Our reliance on sole or single source suppliers could harm our ability to conduct clinical trials and meet demand for our product in a timely manner or within budget.

We currently depend on sole or single source suppliers for some of the components necessary for the production of C-Scan. For example, we currently have a single supplier for the motor used to rotate the collimated X-ray source in C-Scan, for the customized X-ray detectors and batteries used in C-Scan. There is a limited number of manufacturers worldwide who are capable of manufacturing the motor, the customized X-ray detectors and the batteries that we currently use in C-Scan. In addition, the application-specific integrated circuit, or ASIC, residing in C-Scan is currently manufactured for us by a single semiconductor fabrication plant, or FAB. Furthermore, we do not currently have written contracts with all our sole or single suppliers. While our current suppliers have been able to supply the required quantities of such components to date, if the supply of these components is disrupted or terminated or if our current suppliers are unable to supply required quantities of components, we may not be able to find alternative sources for these key components in a timely manner. Although we are planning to maintain strategic inventory of key components, the inventory may not be sufficient to satisfy the demand for C-Scan if such supply is interrupted or may be subject to risk of loss due do catastrophic events, such as a global political crisis or war, or a fire at our storage facility. In addition, to partially mitigate the risks of reliance on sole and single source suppliers, we are seeking alternate manufacturers for some of our components which requires us to dedicate significant resources and investment. There can be no assurance that we will be successful in seeking alternate suppliers or establish our own production line. As a result of the foregoing, we may be unable to meet our clinical trials timelines and meet the demand for C-Scan, which could harm our ability to generate revenues, lead to customer dissatisfaction and damage our reputation. If we are required to change the supplier of any of these key components, there may be a significant delay in locating a suitable alternative manufacturer. In addition, we may be required to verify that the new manufacturer maintains facilities and procedures that comply with FDA and other applicable quality standards and with all applicable regulations and guidelines. Our agreement with the sole supplier of the X-ray source used in C-Scan was scheduled to expire on December 31, 2021. As part of our mitigation plan, in December 2021, we signed an amendment to the agreement, or the Amended Service Agreement, with the sole supplier of the X-ray source used in C-Scan and concurrently entered into a Sub-lease Agreement, or the Sub-lease Agreement with the supplier, according to which we agreed to lease approximately 70 square meters of laboratory space at the supplier premises. According to the Amended Service Agreement, we will independently produce the X-ray source using our own production employees. The Amended Service Agreement extends the terms of the service agreement until the Sub-lease Agreement enters into effect upon receipt of certain certificates including a business license from the Petach Tikva municipality, which has not yet been obtained. We plan to continue to expand our in-house production line for our X-ray source in Israel, however we cannot assure you that we will successfully complete this effort and we may be required to find an alternative supplier for the X-ray source, which we may not be able to do in a timely manner. The delays associated with the introduction of a new manufacturer for certain key components, could delay our ability to manufacture C-Scan in a timely manner or within budget. Furthermore, in the event that the manufacturer of a key component of C-Scan ceases operations or otherwise ceases to do business with us, we may not have access to the information necessary to enable an alternative supplier to manufacture the component. The occurrence of any of these events could harm our ability to meet demand for C-Scan in a timely manner or within budget.

Macro & Political

Total Risks: 5/70 (7%)Above Sector Average

Economy & Political Environment3 | 4.3%

Economy & Political Environment - Risk 1

Added

We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing military conflict between Russia and Ukraine. Our business, financial condition and results of operations may be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine or any other geopolitical tensions.

U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. On February 24, 2022, a full-scale military invasion of Ukraine by Russian troops was reported. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets. Additionally, Russia’s prior annexation of Crimea, recent recognition of two separatist republics in the Donetsk and Luhansk regions of Ukraine and subsequent military interventions in Ukraine have led to sanctions and other penalties being levied by the United States, European Union and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic, including agreement to remove certain Russian financial institutions from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) payment system. Additional potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional funds. Any of the abovementioned factors could affect our business, prospects, financial condition, and operating results. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described in this Annual Report on Form 20-F.

Economy & Political Environment - Risk 2

Our principal offices, research and development facilities and some of our suppliers are located in Israel and, therefore, our business, financial condition and results of operation may be adversely affected by political, economic and military instability in Israel.

Our principal offices and research and development facilities are located near Haifa, in the northern part of Israel and our own X-ray production line is located in Petach Tikva, Israel. In addition, all of our employees and officers, and one of our directors, are residents of Israel. Accordingly, political, economic and military conditions in Israel may directly affect our business. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboring countries. In recent years, Israel has been engaged in sporadic armed conflicts with Hamas, an Islamist terrorist group that controls the Gaza Strip, with Hezbollah, an Islamist terrorist group that controls large portions of southern Lebanon, and with Iranian-backed military forces in Syria. In addition, Iran has threatened to attack Israel, may be developing nuclear weapons and has targeted cyber attacks against Israeli entities. Some of these hostilities were accompanied by missiles being fired from the Gaza Strip against civilian targets in various parts of Israel, and negatively affected business conditions in Israel. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations and results of operations. Popular uprisings in various countries in the Middle East and North Africa are affecting the political stability of those countries. Such instability may lead to deterioration in the political and trade relationships that exist between the State of Israel and these countries. Furthermore, several countries, principally in the Middle East, restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on doing business with Israel and Israeli companies if hostilities in the region continue or intensify. Such restrictions may seriously limit our ability to sell our products to customers in those countries. Similarly, Israeli corporations are limited in conducting business with entities from several countries. Parties with whom we may do business could decline to travel to Israel during periods of heightened unrest or tension. In addition, the political and security situation in Israel may result in parties with whom we may have agreements involving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions in such agreements. In addition, any hostilities involving Israel could have a material adverse effect on our facilities including our corporate office or on the facilities of our local suppliers, in which event all or a portion of our inventory may be damaged, and our ability to deliver products to customers could be materially adversely affected. Furthermore, the war and terrorism insurance we maintain may not be adequate to cover our losses associated with armed conflicts and terrorist attacks. Although the Israeli government in the past covered the reinstatement value of certain damages that were caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained, or if maintained, will be sufficient to compensate us fully for damages incurred. Any losses or damages incurred by us could have a material adverse effect on our business. In addition, our operations could also be disrupted by the obligations of personnel to perform military service. As of December 31, 2021, we had 81 employees and independent contractors, all of whom were based in Israel. Some of these employees and independent contractors may be called upon to perform up to 54 days in each three year period (and in the case of military officers, up to 84 days in each three year period) of military reserve duty until they reach the age of 40 (and in some cases, depending on their specific military profession up to 45 or even 49 years of age) and, in certain emergency circumstances, may be called to immediate and unlimited active duty. In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists and it is possible that there will be similar large-scale military reserve duty call-ups in the future. Our operations could be disrupted by the absence of a significant number of employees related to military service, which could materially adversely affect our business and results of operations. Any hostilities involving Israel, terrorist activities or political instability in the region or the interruption or curtailment of trade between Israel and its present trading partners, or significant downturns in the economic or financial condition of Israel, could adversely affect our operations and product development, cause our revenues to decrease and adversely affect our share price.

Economy & Political Environment - Risk 3

The adoption of healthcare reform and deficit reduction measures in the United States may adversely affect our business and financial results.

The Patient Protection and Affordable Care Act of 2010, or the PPACA, which was modified on March 30, 2010 by the enactment of the Health Care and Education Reconciliation Act of 2010, affects the way healthcare is financed by both governmental and private insurers, and significantly impacts the device industry. The PPACA is intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose new taxes and fees on pharmaceutical and medical device manufacturers, and impose additional health policy reforms. The PPACA imposes, among other things, an annual excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in the United States beginning in 2013, resulting in an anticipated cost to the medical device industry of up to $20 billion over the next decade. We likely will be subject to the excise tax with respect to C-Scan if it is approved for sale in the United States. The PPACA also limits the rate of growth in Medicare payments to providers and authorizes certain voluntary demonstration projects beginning no later than 2013 around development of bundling payments for acute, inpatient hospital services, physician services, and post-acute services for episodes of hospital care. In addition, the PPACA provides for the establishment of an Independent Payment Advisory Board, or IPAB, that, beginning in 2014, could recommend changes in Medicare payments to physicians and other providers that would take effect unless Congress passes an alternative measure to achieve the same amount of savings. The IPAB has not yet been created. The PPACA also increases fraud and abuse penalties and expands the scope and reach of the Federal Civil False Claims Act and government enforcement tools, which may adversely impact healthcare companies. There have been judicial and congressional challenges to the PPACA. The U.S. Supreme Court heard a constitutional challenge to the PPACA and in June 2012 held that the PPACA is constitutional. However, states are allowed to opt out of the expansion of eligibility criteria for Medicaid under the PPACA and many states have chosen to do so, causing many uninsured patients to remain without coverage. In addition to the PPACA, the effect of which cannot presently be quantified given its recent enactment, various healthcare reform proposals have also emerged at the state level. If a law is enacted, many if not all of the provisions of the PPACA may no longer apply to prescription drugs. While we are unable to predict what changes may ultimately be enacted, to the extent that future changes affect how any future products are paid for and reimbursed by government and private payers our business could be adversely impacted. On December 14, 2018, a federal district court in Texas ruled that the PPACA is unconstitutional as a result of the Tax Cuts and Jobs Act, the federal income tax reform legislation previously passed by Congress and signed by President Trump on December 22, 2017, that eliminated the individual mandate portion of the PPACA. The case, Texas, et al, v. United States of America, et al., (N.D. Texas), is an outlier, but in 2019, the Fifth Circuit Court of Appeals subsequently upheld the lower court decision which was then appealed to the United States Supreme Court. On June 17, 2021, the U.S. Supreme Court held that the plaintiffs did not have standing to challenge the individual mandate because they have not shown a past or future injury. In November 2020, Joseph Biden was elected President and, in January 2021, the Democratic Party obtained control of the Senate. As a result of these electoral developments, it is unlikely that continued legislative efforts will be pursued to repeal PPACA. Instead, it is possible that legislation will be pursued to enhance or reform PPACA. We are not able to state with any certainty what will be the impact of this court decision on our business pending further court action and possible appeals. We cannot predict whether future healthcare initiatives will be implemented at the federal or state level or the effect any future legislation or regulation will have on us. However, we anticipate that the PPACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and an additional downward pressure on the price that we receive for any approved product, and could adversely affect our business. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. Insurers may also refuse to provide any coverage of uses of approved products for medical indications other than those for which the FDA has granted market approvals, all of which may adversely affect our business, financial condition and results of operations, possibly materially. In addition, other legislative changes have been proposed and adopted since the PPACA was enacted. In August 2011, President Obama signed into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend to Congress proposals in spending reductions. The Joint Select Committee did not achieve a targeted deficit reduction of an amount greater than $1.2 trillion for the years 2013 through 2021, triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to healthcare providers of up to 2.0% per fiscal year, starting in 2013. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several categories of healthcare providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. If we ever obtain regulatory approval and commercialization of C-Scan or any future product candidates, these laws may result in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on our customers and accordingly, our financial operations. Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of C-Scan or any future product candidates may be. Although we cannot predict the full effect on our business of the implementation of existing legislation or the enactment of additional legislation pursuant to healthcare and other legislative reform, we believe that legislation or regulations that would reduce reimbursement for, or restrict coverage of, C-Scan or any future product candidates, could adversely affect how much or under what circumstances healthcare providers will prescribe or administer our products. This could materially and adversely affect our business by reducing our ability to generate revenue, raise capital, obtain additional collaborators and market C-Scan or any future product candidates. In addition, we believe the increasing emphasis on managed care in the United States has and will continue to put pressure on the price and usage of pharmaceutical products, which may adversely impact any future product sales. In addition to healthcare reform, other deficit reduction measures could affect reimbursement for our device and related procedures. For example, beginning April 1, 2013, Medicare payments for all items and services have been reduced by 2% under the sequestration (i.e., automatic spending reductions) required by the Budget Control Act of 2011, as amended by the American Taxpayer Relief Act of 2012. These cuts will remain in effect until 2024 unless Congress enacts legislation to cancel or delay the cuts. These payment reductions, or similar efforts to reduce Medicare spending to control the federal deficit, could adversely affect our business by reducing reimbursement to the providers who purchase and use our devices and perform related procedures. The implementation of the reporting and disclosure obligations of the Physician Payment Sunshine Act’s provisions relating to healthcare reform could adversely affect our business. A health care reform provision, generally referred to as the Physician Payment Sunshine Act or Open Payments Program, has imposed new reporting and disclosure requirements for drug and device manufacturers with regard to payments or other transfers of value made to certain practitioners (including physicians, dentists and teaching hospitals), and for such manufacturers and for group purchasing organizations, with regard to certain ownership interests held by physicians in the reporting entity. On February 1, 2013, the Centers for Medicare and Medicaid Services, or CMS, released the final rule to implement the Physician Payment Sunshine Act. As required under the Physician Payment Sunshine Act, CMS will publish information from these reports on a publicly available website, including amounts transferred and physician, dentist and teaching hospital identities. The final rule implementing the Physician Payment Sunshine Act is complex, ambiguous, and broad in scope. If we participate in federal healthcare programs, meaning our product is reimbursed by a federal healthcare program such as Medicare, Medicaid, or Children’s Health Insurance Program, our product would be considered a “covered device.” Within 180 days of becoming “covered,” we would be required to collect and report detailed information regarding certain financial relationships we have with physicians and teaching hospitals. The Physician Payment Sunshine Act preempts similar state reporting laws, although we may be required to report under certain of such state laws. Our compliance with the new final rule imposes additional costs on us and requires additional resources including dedicated personnel with experience and expertise in this area. Failure to comply may expose us to federal and/or state enforcement action and fines.

Natural and Human Disruptions1 | 1.4%

Natural and Human Disruptions - Risk 1

We or the third parties upon whom we depend may be adversely affected by natural disasters and/or health epidemics or pandemics, such as the COVID-19 pandemic, and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.

Natural disasters could severely disrupt our operations and have a material adverse effect on our business, results of operations, financial condition and prospects. If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our office, manufacturing and/or lab spaces, that damaged critical infrastructure, such as the manufacturing facilities of our third-party contract manufacturers, subcontractors, suppliers, CROs, clinical sites, clinical investigators, clinical coordinators, third parties ongoing activities and schedules or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our plans and business for a substantial period of time. In early 2020, the World Health Organization declared the rapidly spreading coronavirus disease (COVID-19) outbreak a pandemic. We have experienced disruptions to our operations as a result of the COVID-19 pandemic, including disruptions to the Company’s clinical studies and implemented several temporary cost reduction measures. We have also implemented several measures according to the Israel Ministry of Health’s guidelines, including remote working whenever possible, physical separation between employees and daily employee health monitoring. Infection rates in Israel have recently spiked upwards and the extent to which the COVID-19 pandemic shall impact our operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the outbreak, the impact on the global economy, the impact of any further waves of COVID-19, the efficacy of the vaccines and the other actions that may be required to contain COVID-19 or treat its impact. In particular, the continued spread of COVID-19 globally could materially adversely impact our operations and workforce, including our research and clinical trials and our ability to continue to raise capital, could affect the operations of key governmental agencies, such as the FDA, which may delay our development plans, and could result in the inability of our suppliers to deliver components or raw materials on a timely basis or at all, each of which in turn could have a material adverse impact on our business, financial condition and results of operation. The disaster recovery and business continuity plans we have in place may prove inadequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which could have a material adverse effect on our business.

Capital Markets1 | 1.4%

Capital Markets - Risk 1

Exchange rate fluctuations between the U.S. dollar and the NIS and the Euro and inflation may negatively affect our earnings and we may not be able to hedge our currency exchange risks successfully.

The dollar is our functional and reporting currency. However, a significant portion of our operating expenses, including personnel and facilities related expenses, are incurred in NIS. As a result, we are exposed to the risks that the NIS may appreciate relative to the U.S. dollar, or, if the NIS instead depreciates relative to the U.S. dollar, that the inflation rate in Israel may exceed such rate of depreciation of the NIS, or that the timing of such depreciation may lag behind inflation in Israel. In any such event, the dollar cost of our operations in Israel would increase and our dollar-denominated results of operations would be adversely affected. In year 2021, the NIS appreciated by 3.266% relative to the U.S. dollar. The Israeli rate of inflation has not had a material adverse effect on our financial condition during the years 2021, 2020 and 2019. In addition, we may incur operating expenses denominated in Euros, and therefore, our operating results may also be subject to fluctuations due to changes in the U.S. dollar/Euro exchange rate. We cannot predict any future trends in the rate of inflation in Israel or the rate of devaluation (if any) of the NIS, the Euro and other foreign currencies against the U.S. dollar. Although we engage in currency hedging arrangements from time to time, these measures may not adequately protect us from fluctuations in the exchange rates of the NIS, the Euro and other foreign currencies in relation to the U.S. dollar (and/or from inflation of such foreign currencies), and involve costs and risk of their own.

Ability to Sell

Total Risks: 4/70 (6%)Below Sector Average

Competition1 | 1.4%

Competition - Risk 1

We expect to face competition from large, well-established manufacturers of traditional technologies for CRC screening and detection of gastrointestinal disorders, as well as from new competitive technologies, especially within the field of biomarkers.

Competition for C-Scan comes from traditional well-entrenched manufacturers of tests and equipment for CRC screening, such as colonoscopy, sigmoidoscopy, CT Colonography, or CTC, optical capsule endoscopy, fecal occult blood tests, or FOBTs, and fecal immunochemical tests, or FITs. The principal manufacturers of equipment for optical colonoscopy and sigmoidoscopy include Olympus, Pentax, Hoya and Fuji Film. The principal manufacturers of equipment for CTC include General Electric Healthcare Systems, Siemens Medical Solutions, Philips Medical Systems Ltd. and Toshiba Corporation. The principal manufacturer of equipment for optical capsule endoscopy includes Medtronic plc. All of these companies have substantially greater financial resources than we do, and they have established reputations as well as worldwide distribution channels for providing medical instruments to physicians. In addition, several companies have developed or are developing non-invasive technologies based on stool, serum (from blood and other bodily fluids), or molecular diagnostics, or MDx, tests that are used to indicate the presence of CRC and polyps in the colon. These companies include Exact Sciences, Polymedco, Epigenomics AG, Gene News, EDP Biotech Corporation, Illumina, Inc., Quest Diagnostics, VolitionRx Nu.Q diagnostic, Freenome and Grail. Exact Sciences commenced sales of its Cologuard ®, a non-invasive stool DNA screening test for colorectal cancer in 2015, and is constantly seeking performance improvements through additional studies, alongside commercial expansion. During the past years, there has been an extensive effort on the part of our competitors to utilize molecular biology and advanced computational techniques to develop methods capable of identifying cell-free cancer biomarkers. These advancement efforts are assisted by large capital investments, supported in turn by claims that certain products may promise the possibility of defeating certain cancers in their early stages. In addition, procedures for bowel cleansing that are less onerous are constantly being developed, which could make our entry into the market more difficult. For instance, bowel cleansing initiated by the ingestion of pills or food-substitute diet regimes rather than through drinking large amounts of distasteful liquids may be viewed as an improvement to the cleansing process, but other screening methods may be even more palatable to patients. If we are unable to convince patients and physicians to adopt C-Scan over the current technologies marketed by our competitors or future new technologies that may be marketed by our existing or potential competitors, our business and results of operations may suffer.

Demand1 | 1.4%

Demand - Risk 1

We expect to derive most of our revenues from sales of one product. Our inability to successfully commercialize this product, or any subsequent decline in demand for this product, could severely harm our ability to generate revenues.

We are currently dependent on the successful commercialization of C-Scan to generate revenues. As a result, factors adversely affecting our ability to successfully commercialize, or the pricing of or demand for, this product could have a material adverse effect on our financial condition and results of operations. If we are unable to successfully commercialize or create market demand for C-Scan, we will have limited ability to generate revenues. Furthermore, we may be vulnerable to fluctuations in demand for C-Scan. Such fluctuations in demand may be due to many factors, many of which are beyond our control, including, among others: • market acceptance of a new product, including healthcare professionals’ and patients’ preferences; • market acceptance of the clinical safety and performance of C-Scan; • development of competitive or similarly cost-effective products by our competitors; • development delays of C-Scan; • technological innovations in CRC screening, treatment and prevention; • adverse medical side effects suffered by patients using C-Scan, whether actually resulting from the use of C-Scan or not; • changes in regulatory policies toward CRC screening or imaging technologies; • changes in regulatory approval, clearance requirements and licensure for our product; • third-party claims of intellectual property infringement; • budget constraints and the availability of reimbursement or insurance coverage from third-party payors for C-Scan; • increases in market acceptance of other technologies; • adverse responses from certain of our competitors to the offering of C-Scan; • licensure and perceived risk of manufacturing and using a product containing a radioactive source, including associated agencies refusal to authorize capsule disposal; and • the shelf life of our C-Scan Cap.

Sales & Marketing2 | 2.9%

Sales & Marketing - Risk 1

If we are unable to achieve reimbursement and coverage from government and private third-party payors for procedures using C-Scan, or if reimbursement is insufficient to create an economic benefit for purchasing or using C-Scan when compared to alternative procedures, demand for our products may not grow at the rate we expect.

The demand for C-Scan will depend significantly on the eligibility of the procedures performed using C-Scan for reimbursement through government-sponsored healthcare payment systems and private third-party payors. Reimbursement practices vary significantly from country to country and within some countries, by region, and we must obtain reimbursement approvals on a country-by-country and/or region-by-region basis. In general, the process of obtaining reimbursement and coverage approvals has been longer outside of the United States. We may not be able to obtain reimbursement approvals in a timely manner or at all and existing reimbursement and coverage policies may be revised from time to time by government and private third-party payors. If physicians, hospitals and other healthcare providers are unable to obtain sufficient coverage and reimbursement from government and private third-party payors for procedures using C-Scan, if reimbursement is, or is perceived by our customers to be, insufficient to create an economic incentive for purchasing or using C-Scan, or if such reimbursement does not adequately compensate physicians and health care providers compared to the other procedures they offer, demand for our products may not grow at the rate we expect.

Sales & Marketing - Risk 2

We currently intend to sell our products mainly in the United States, Europe, Israel and Japan and, if we are unable to manage our operations in these territories, our business, financial condition and results of operations could be materially adversely affected.

Our headquarters and substantially all of our operations and employees are presently located in Israel, but we currently intend to market our products mainly in the United States, Europe, Israel and Japan. Accordingly, we are subject to risks associated with international operations, and our international sales and operations will require significant management attention and financial resources. In addition, our international sales and operations will subject us to risks inherent in international business activities, many of which are beyond our control and include, among others: • foreign certification, registration and other regulatory requirements; • customs clearance and shipping delays; • import and export controls; • trade restrictions; • multiple and possibly overlapping tax structures; • difficulty forecasting the results of our international operations and managing our inventory due to our reliance on third-party distributors; • differing laws and regulations, business and clinical practices, licensures, government and private third-party payor reimbursement policies and patient preferences; • differing standards of intellectual property protection among countries; • difficulties in staffing and managing our international operations; • difficulties in penetrating markets in which our competitors’ products are more established and achieving a competitive sale price for our product; • currency exchange rate fluctuations and foreign currency exchange controls and tax rates; and • political and economic instability, war or acts of terrorism or natural disasters, emergence of a pandemic, or other widespread health emergencies (or concerns over the possibility of such an emergency, including for example, the COVID-19 pandemic). If we are unable to manage our international operations effectively, our business, financial condition and results of operations could be materially adversely affected.

See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.

FAQ

What are “Risk Factors”?

Risk factors are any situations or occurrences that could make investing in a company risky.

The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.

They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.

It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.

How do companies disclose their risk factors?

Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.

Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.

Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.

According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.

How can I use TipRanks risk factors in my stock research?

Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.

You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.

Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.

A simplified analysis of risk factors is unique to TipRanks.

What are all the risk factor categories?

TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.

1. Financial & Corporate

Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.

2. Legal & Regulatory

Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
Regulation – risks related to compliance, GDPR, and new legislation.
Environmental / Social – risks related to environmental regulation and to data privacy.
Taxation & Government Incentives – risks related to taxation and changes in government incentives.

3. Production

Costs – risks related to costs of production including commodity prices, future contracts, inventory.
Supply Chain – risks related to the company’s suppliers.
Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.

4. Technology & Innovation

Innovation / R&D – risks related to innovation and new product development.
Technology – risks related to the company’s reliance on technology.
Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.

5. Ability to Sell

Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
Competition – risks related to the company’s competition including substitutes.
Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
Brand & Reputation – risks related to the company’s brand and reputation.

6. Macro & Political

Economy & Political Environment – risks related to changes in economic and political conditions.
Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
International Operations – risks related to the global nature of the company.
Capital Markets – risks related to exchange rates and trade, cryptocurrency.

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